The impact of interest rates on small businesses and local economies.

[摘要] Many debates have been waged about the effect of the interest rate ceilingson the provision of financial services to small businesses. It has beenconsidered as one of the major constraints in small business access to capitaland it is also considered a major inhibitor of small business development. Thepresent study attempted to determine whether interest rate ceilings should beundertaken or not, and how in a South African socio-political context thiswould help small business development. Concomitantly, it was consideredhow the interest rates affect small businesses according different purposes,size and terms of loans.A case study method was used to pursue this research. The case study ofMamelodi Township (Pretoria) and Kildare/Jonkllanqa village (Mhala District -Northern Province) were undertaken. Open-ended interviews with borrowersand financial institutions (providers) were conducted. The result of theinterviews was analysed and reinforced with an analysis of national andinternational secondary literature.One of the main findings of the research was that interest rates ceiling arenecessary and substantial in helping small business development. It wasestablished that interest rate ceilings have to be considered in a flexiblemanner, accordlng specific conditions of small business activity. It was alsoconcluded that interest rate ceilings have to be a consequence of a regulatoryframework which enables small business access to capital, and, thus,development of their local community. The result of the research likewise, hasindicated that for small, short term, working capital loans, the impact ofinterest rates on borrowers is smaller than for larger, longer term borrowers.The effect of the circulation of resources in a community in the case of a lowerlevel interest rates deserves more investigation but there are primaryindications of some positive impact on.

[发布机构] University of the Witwatersrand