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Bank Market Structure and SMMEs’ Access to Finance: A South African Perspective

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  • Phillip Ngonisa

    (Department of Economics, University of Fort Hare, East London 5201, South Africa)

  • Bahle Mgxekwa

    (Department of Economics, University of Fort Hare, East London 5201, South Africa)

  • Nomusa Ndlovu

    (Department of Economics, University of Fort Hare, East London 5201, South Africa)

  • Nomasomi Ngonyama

    (Department of Economics, University of Fort Hare, East London 5201, South Africa)

  • Courage Mlambo

    (Department of Economics, University of Fort Hare, East London 5201, South Africa)

Abstract

While the importance of the banking sector on various fundamental economic variables is well-documented in the literature, little is known about the relationship between the bank market structure and access to finance for opaque firms, particularly in developing economies such as South Africa. Using ordered probit and logit models, we investigate the impact of bank market structure on small, micro and medium enterprises (SMMEs)access to finance. Our results show that high bank concentration increases the obstacle to accessing finance for SMMEs in South Africa, and the relationship is non-linear. Thus, to a greater extent, our study validates the market power hypothesis, which argues that low competition diminishes firms’ access to finance.

Suggested Citation

  • Phillip Ngonisa & Bahle Mgxekwa & Nomusa Ndlovu & Nomasomi Ngonyama & Courage Mlambo, 2023. "Bank Market Structure and SMMEs’ Access to Finance: A South African Perspective," Economies, MDPI, vol. 11(1), pages 1-11, January.
    • Handle: RePEc:gam:jecomi:v:11:y:2023:i:1:p:30-:d:1036006
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    References listed on IDEAS

    as
    1. Raquel Lago Gonzalez & Jose A. Lopez & Jesus Saurina, 2007. "Determinants of access to external finance: evidence from Spanish firms," Working Paper Series 2007-22, Federal Reserve Bank of San Francisco.
    2. Ibrahim, Muazu & Alagidede, Paul, 2018. "Effect of financial development on economic growth in sub-Saharan Africa," Journal of Policy Modeling, Elsevier, vol. 40(6), pages 1104-1125.
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