Challenges encountered by SMMEs in accessing bank credit: a case of Vhembe District Municipality

Policymakers and scholars universally accept and recognize the influence of small, macro, and medium enterprises (SMMEs) on stimulating economic growth and job creation. To succeed and prosper, SMMEs need to establish a sound financial management function; therefore, it is vital to investigate the financial challenges these firms are experiencing. The objective of this paper was, to investigate possible challenges that SMMEs experience when applying for credit from banks. The study sought to answer the main research question - ‘What challenges are encountered by SMMEs when applying for credit from banks? The study adopted a qualitative research methodology. The population used in this research was derived from SMMEs and banking officials in the Vhembe District Municipality area. Stratified random sampling was used to select a sample of 10 research participants. An interview guide was used to gather data from the participants; the data was analyzed using Atlas.ti. The results indicated that most SMMEs in the Vhembe district are not adequately supported, especially in the areas of financial resources, as well as in financial literacy skills and expertise. Specifically, this study identified that the credit application challenges faced by SMMEs are related to - lack of collateral security, lack of financial application education, complex bank credit access regulations, non-satisfaction of banks’ qualifying criteria, as well as stringent credit system, and documentation requirements. Key Words:Challenges, Collateral, Credit, Finance, Access, SMMEs