Financial inclusion and survival of informal businesses in the townships of Gauteng Province.
Sondzaba, Sibongiseni Wentzel
Sondzaba, Sibongiseni Wentzel
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Abstract
This research determined that there is a link between financial inclusion and the survival of informal businesses. The analysis pointed out that the informal sector plays a significant role in South Africa, with approximately 20% of the labour force operating in this domain, primarily due to inadequate regulations and complicated procedures. Furthermore, one of the principal hindrances faced by informal businesses is their inability to access financial services as they are commonly operated by people who are unemployed in formal sectors and do not possess sufficient resources to utilise financial facilities.
The study followed a research methodology, which integrated both quantitative and qualitative analysis techniques to gauge the degree of financial incorporation and the survival of informal businesses in selected townships located in the Gauteng province. The study postulated three conjectures that relate to the accessibility to monetary resources, namely market openings, business contacts, and entrepreneurial competencies. Furthermore, it scrutinised the influence of these factors on the sustainability and progress of informal businesses. The study focused on the townships of Soweto, Soshanguve, and Tembisa. This study found that, firstly, informal enterprises located in Gauteng townships encounter a plethora of obstacles including, but not limited to, insufficient resources,
unfavourable treatment by authorities, absence of government support, and impediments to acquiring capital. Secondly, the dearth of funding options coupled with an inadequate educational infrastructure and limited business proficiency were some of the reasons behind the elevated rejection rates for loan applications. Thirdly, in order to promote financial inclusion and boost economic progress in the informal sector, it is imperative to enhance educational opportunities and to offer financial literacy programmes. Lastly, restricted entry to finance and a lack of basic knowledge pertaining to financial management thwart attempts in achieving financial inclusivity within Gauteng’s informal sector. This study underlines the significance of policymakers giving due importance to financial literacy initiatives for informal business owners. It stresses the need for collaboration between the formal and informal sectors to enhance financial access and entrepreneurial opportunities. Furthermore, policymakers should offer tax exemptions and subsidies as incentives to encourage informal businesses to become part of the formal economy, which can foster greater economic growth and job creation.
Description
A dissertation submitted in fulfilment of the requirements for the degree Master of Business Studies in Finance in the Department of Finance and Investment, Faculty of Economics and Finance at the Tshwane University of Technology.
Date
2023-10-01
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Tshwane University of Technology
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Keywords
Townships, Households, Financial products, Services, Financial inclusion, Financial exclusion, South Africa