Investigating determinants of access to formal credit - South African women entrepreneurs in the informal sector
Financial inclusion remains vital for the empowerment of women. Women, particularly in the informal sector, face the challenge of access to formal credit. The aim of the study is to investigate the determinants of access to formal credit by women in the informal sector. A logit regression model is employed as an estimation technique, to empirically test the relationship between individual characteristics and access to formal credit. The study uses data from the 2016 FinScope National Survey to identify which of these determinants affects access to credit in South Africa. The FinScope data consists of a nationally representative sample size of 4992 South African men and women aged 16 years and older. The findings indicate that ‘fear of applying for a loan', ‘loan from moneylenders' as well as ‘loan from family and friends' were variables found to be statistically insignificant determinants of access to credit. In line with expectation, the results indicate that possession of a tertiary education; having undergone vocational training; being older; having access to a communication device; and having a positive attitude towards technology, increase the chances of access to credit. The results also prove the hypotheses that being female; an entrepreneur in the informal sector; possession of a primary education; being based in a rural area; having an irregular source of income; or the use of internal funds are negatively correlated to access to credit. The findings highlight the need to find meaningful solutions to address access to credit for women entrepreneurs in the informal sector in South Africa.
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