The importance of due diligence procedures on sole traders in local banks

Abstract

Sole traders have a relatively less restricted internal system than bigger organizations, which makes them more susceptible to oversight and financial scrutiny. The objective of this research is to explain the need for due diligence procedures on sole traders. Due diligence is perhaps one of the most commonly applied legal requirements, yet its implementation and consequences on small self-employed business owners is often neglected. This study aims to fill that gap and hopes to show how such practices affect the sustainability and credibility of sole traders as well as to the financial wellbeing of the bank. A qualitative method of data collection was used for this study. Five semi-structured interviews were conducted with professionals from local banks and regulatory bodies. Thematic analysis of these interviews showed specific patterns regarding the application of due diligence and the challenges encountered in working with sole traders. Due diligence, even when providing greater clarity of risks and ensuring prudent management, appears to hinder sole traders who lack formal documents and basic financial understanding. Custom-tailored due-diligence methodologies can increase inclusive corporate registration and compliant governance structures, as suggested by the study's findings.