Owners' Characteristics and the Financial Bootstrapping Strategies Used by Rural Small Businesses in South Africa

Maurice Nchabeleng,Olawale Fatoki,Olabanji Oni

doi:10.22610/jebs.v10i4(j).2427

Maurice Nchabeleng, Olawale Fatoki + Show 1 more

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https://doi.org/10.22610/jebs.v10i4(j).2427

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Abstract

The purpose of this study was to examine if there are significant differences in the financial bootstrapping strategies of rural small businesses on the basis of owners' demographic characteristics (level of education and gender). The research followed a quantitative research method with descriptive research design. A sample of 104 rural small businesses participated in the survey. Data was collected through the use of self-administered questionnaires in a survey. The participants in the study were rural small business owners in Fetakgomo Municipality located in the Limpopo Province of South Africa. The study utilised the convenience and snowball sampling techniques to select the study participants. Data analysis included descriptive statistics, factor analysis and the T-test. The Cronbach alpha was used to measure reliability. The results of the T-test showed significant differences between gender and level of education and the financial bootstrapping methods used by rural small businesses. Recommendations are made to improve the awareness of bootstrapping by small business owners.

Highlights

Introduction and BackgroundThere is no uniform definition of a rural area in South Africa (Gaede & Versteeg, 2011; Jacobs & Hart, 2012)
The findings show that the most frequently used bootstrapping methods by rural small businesses are obtaining loans from family and friends, withholding salaries and running the business from home The limited use of bootstrapping methods can be due to the fact that rural small and medium enterprises (SMEs) are not aware of bootstrapping finance
The growth of the small businesses is one of the solutions to the challenges faced by rural areas in South Africa

Summary

Introduction

Introduction and BackgroundThere is no uniform definition of a rural area in South Africa (Gaede & Versteeg, 2011; Jacobs & Hart, 2012). The rural areas of South Africa face many development challenges. Armstrong et al (2007) indicate that the incidence of poverty is much higher in the rural areas of South Africa. The poverty rates of individuals and households in the rural areas more than double the corresponding rates for urban areas. The level of unemployment in the rural areas is much higher than in urban areas. Crime is higher in rural areas compared to urban areas (The South African Presidency, 2008). The creation and growth of small and medium enterprises (SMEs) can help to alleviate the challenges faced by rural areas in South Africa (Mugobo & Ukpere, 2012; Lekhanya, 2016). The failure rate of SMEs is the rural area is very high in South Africa (Chimucheka & Mandipaka, 2015)

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