Financial bootstrapping and the small business sector in a developing economy

Abstract

The assumption in academic literature and public debate is that lack of financial resources generally restrains small businesses’ development and growth. With the constraints that small businesses face to access outside funding, there is a need to investigate bootstrapping as a means of obtaining resources which will lead to a reduction in the need for outside financing. The challenge facing small businesses in terms of obtaining finance from traditional sources has necessitated this study. A sample was chosen on a non-probability basis using convenience sampling of small business owners within the eThekwini Municipality, KwaZulu-Natal, South Africa. 83 participants completed the questionnaire. The data collected was analysed using descriptive and inferential statistics. The findings regarding awareness of financial bootstrapping as a source of funding remains unknown. The evidence in the study shows that a number of respondents unknowingly used some of the bootstrapping methods.

SMME attitudes towards financial bootstrapping: A perspective from a developing economy

“…Another contributing factor affecting the use of financial bootstrapping is the lack of awareness by SMMEs. The majority of small business owners are not aware of financial bootstrapping and its use (Zwane & Nyide, 2016). This argument is in line with Munyanyi (2015) who contends that more needs to be done while awareness of the strategies for financial bootstrapping is evident in literature.…”

“…Afolabi et al (2014) assert that businesses with higher leverage, lower liquidity, and lower profitability are more likely to bootstrap. However, the general consensus in SMME research, within the developing economy context, is that a very limited number of these organisations use financial bootstrapping (Fatoki, 2014;Afolabi et al, 2014;Schofield, 2015;Zwane & Nyide, 2016).…”

“…Only 40% responded that there is some sort of training done on how to use financial bootstrapping methods. (Zwane & Nyide, 2016) argue that most SMMEs use financial bootstrapping being unaware. Therefore, even if business owners have no formal training, they inevitably use bootstrapping methods.…”

Smme Attitudes Towards Financial Bootstrapping: A Perspective From a Developing Economy

“…The majority of small business owners are not aware of financial bootstrapping and its use (Zwane and Nyide, 2016). This argument is in line with Munyanyi (2015) who contends that while awareness of the strategies for financial bootstrapping is evident in literature, more needs to be done.…”

“…Only 40% responded that there is some sort of training done on how to use financial bootstrapping methods. (Zwane and Nyide, 2016) argue that most SMMEs use financial bootstrapping unaware. Therefore, even if business owners have no formal training, they inevitable use bootstrapping methods.…”