Finance for SMEs and its effect on growth and inequality: evidence from South Africa. Issue 4 (2nd October 2021)

• Record Type: Journal Article
• Authors: Nanziri, Lwanga Elizabeth; Wamalwa, Peter Simiyu
• Is Part Of: Transnational corporations review. Volume 13:Issue 4(2021)
• Page Start: 450
• Page End: 466
• Publication Date: 2021-10-02
• Subjects: Financial inclusion -- SMEs -- talent -- growth -- inequality -- general equilibrium; 338.88
• DOI: 10.1080/19186444.2021.1925044
• Languages: English
• ISSNs: 1918-6444

Abstract

Abstract: In this paper, we analyse the effects of relaxing financial constraints on economic growth, total factor productivity and inequality, using a micro-founded general equilibrium model and firm-level data for South Africa. The results show that relaxing participation constraints, along with a marginal reduction in collateral requirements and monitoring costs, increases GDP by 3% points, while TFP increases by 2%. Inequality reduces by up to 3% points, driven by improvements in intermediation efficiency. There is, however, minimal participation by wealth-constrained firms either due to lack of information about available finance or preference for internally generated funds.