Assessing the impact of finance on small business development in Africa : the cases of South Africa and Gabon.

M. Tech. Comparative Local DevelopmentSmall Medium and Micro Enterprises (SMMEs) play a critical role in the economic development. Indeed, SMMEs have been recognised as major sources of poverty reduction, employment creation and incomes. It is therefore not surprising that policy makers and researchers, particularly in developing countries have acknowledged SMMEs as an important topic in development policy. Despite their belated discovery by policy makers and their contribution to the economy, their growth remains constrained by a number of key constraints including access to finance. Access to finance has a significant impact on the development or failure of SMMEs. That is to say, finance has increasingly been recognised as a major obstacle in the development of SMMEs. Without finance, SMMEs may not able to develop and sustain their businesses through innovation, hiring of additional staff and the addition of more facilities. The SMMEs sector is known to be very diverse. Indeed, Studies point that there is no single definition of SMMEs, they are defined differently in different contexts and most of SMMEs in Africa operate in the informal sector. This situation has challenged policy makers, making difficult the development of one size fits all policies. The objective in this study is to examine the problem of finance in SMME development and promotion in Africa and more particularly in Gabon and South Africa. The study examined the existing literature on SMMEs in general and more particularly the problem of access to finance in SMME development. The study highlights that SMME's access to finance is constrained by factors such as a lack of information, high interest rates, financial sector policy distortion, the high risk of SMME operations, blacklisting of SMME owners and a lack of government support awareness. In addressing this problem, a number of policies have been developed and include the market developing policies, the market enabling policies and the market harnessing policies