Velenkosini Matsebula, Calynn Anthony
Abstract
This study offers the first of its kind to use FinScope MSME 2010 and 2020 surveys to assess the financial inclusion of MSMEs in South Africa and use the Multiple Correspondence Analysis (MCA) to compute a multidimensional financial inclusion index. This study aims to fill the gap in the literature aimed at addressing the financial inclusion for MSMEs in South Africa. The OLS and probit regressions are estimated to examine the impact of various characteristics of the owner and the business on the financial inclusion index and the probability of the business being financially excluded. The OLS findings indicate that MSMEs with owners who are white, male, middle-aged (35-54), have a Higher Education, reside in the Gauteng province, and are unmarried are associated with a higher financial inclusion index. Moreover, smaller firms face greater challenges in accessing financial services. The Probit regression results align with the OLS findings, confirming MSMEs owned by Blacks, females, aged 16-24 years, with lower levels of education, residing in rural provinces, and married individuals are associated with higher financial exclusion likelihoods. Lastly, the was an overall increase in MSME financial index between 2010 and 2020 and the most frequently used financial services were savings at a bank and a savings account with the MSMEs’ perception of their bank’s services being relatively positive.