Bank Market Structure and SMMEs’ Access to Finance: A South African Perspective

Phillip Ngonisa (), Bahle Mgxekwa, Nomusa Ndlovu, Nomasomi Ngonyama and Courage Mlambo
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Phillip Ngonisa: Department of Economics, University of Fort Hare, East London 5201, South Africa
Bahle Mgxekwa: Department of Economics, University of Fort Hare, East London 5201, South Africa
Nomusa Ndlovu: Department of Economics, University of Fort Hare, East London 5201, South Africa
Nomasomi Ngonyama: Department of Economics, University of Fort Hare, East London 5201, South Africa
Courage Mlambo: Department of Economics, University of Fort Hare, East London 5201, South Africa

Economies, 2023, vol. 11, issue 1, 1-11

Abstract: While the importance of the banking sector on various fundamental economic variables is well-documented in the literature, little is known about the relationship between the bank market structure and access to finance for opaque firms, particularly in developing economies such as South Africa. Using ordered probit and logit models, we investigate the impact of bank market structure on small, micro and medium enterprises (SMMEs)access to finance. Our results show that high bank concentration increases the obstacle to accessing finance for SMMEs in South Africa, and the relationship is non-linear. Thus, to a greater extent, our study validates the market power hypothesis, which argues that low competition diminishes firms’ access to finance.

Keywords: bank concentration; bank competition; access to finance; market power hypothesis; SMMEs (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2023
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