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Full Length Research Paper
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An
investigation into the impact of the usage of debt on the
solvency of SMEs in the Buffalo City Municipality, South
Africa
Fatoki Olawale1*, Mornay
Roberts-Lombard2 and George Herbst1
Department
of Business Management, University of Fort Hare, South
Africa.
Department
of Marketing Management, University of Johannesburg, South
Africa.
*Corresponding author. E-mail:
ofatoki@ufh.ac.za.
Tel: 00927 040-602-2248.
Fax: 00927 040 602-2249.
Accepted 4 February, 2010 |
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Abstract |
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This research investigated the impact of the usage of debt on
the solvency of SMEs in the manufacturing sector in the Buffalo
City Municipality. To achieve this objective, the research
hypothesized that SMEs have a difficulty accessing debt finance
from financial institutions and also that the usage of debt has
a negative impact on the solvency of SMEs. This study is
important because SMEs, despite their contributions to the South
African economy, have not been given due attention as research
on corporate finance has been biased towards large firms. The
results indicated that SMEs have a difficulty accessing debt
finance and that SMEs that use debt are not insolvent. Lastly,
the study recommended that small manufacturing firms, commercial
banks and the South African government take certain measures.
These measures are expected to improve the accessibility to debt
and reduce the cost of debt to SMEs.
Key words:
Debt, insolvency, SMEs. |
