South African banks' risk assessment practices when financing entrepreneurial ventures : a comparative analysis

The development of Small, Medium and Micro Enterprises (SMMEs) contributessignificantly to job creation, social stability and economic welfare. Obtainingfinance for start-up and growing entrepreneurial ventures has proved to becrucial for SMME growth and is therefore the prime concern of this research.This research will specifically investigate the risk assessment practices used bySouth African commercial banks when providing funding to entrepreneurialventures. In addition, the research seeks to establish whether there is consistencyamongst the South African commercial banks in their risk assessmentspractices. Lastly to establish the impact of the global economic crisis of 2008 onthe risk assessment practices of the South African commercial banks. Toachieve this, a qualitative study in the form of expert interviews supported bystructured research questionnaires with representatives of the four large bankswas undertaken. In summary, the findings of the research demonstrated that risk assessmentpractices of the South African commercial banks were consistent with theintegrated theoretical framework and amongst each other. Respondents rankedthe character, capacity and collateral of the business as the most importantcriteria when assessing term loan applications. Furthermore, the impact of theglobal economic crisis of 2008 resulted in the lending policies of the banksbeing more strictly adhered to. Copyright © 2010, University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria Please cite as follows: Sefolo, B 2010, South African banks' risk assessment practices when financing entrepreneurial ventures : a comparative analysis, MBA dissertation, University of Pretoria, Pretoria, viewed yymmdd < http://upetd.up.ac.za/thesis/available/etd-07032011-130919/> F11/502/hj