Inaugural South African SMME access to finance report -conducted by FinFind and sponsored by SA SME Fund
Staying with the funding them, FinFind recently released a report on the funding landscape for South African SMMEs which makes for extremely interesting reading (www.accesstofinancereport.co.za).
Key findings include:
- The SME sector offers a largely untapped market opportunity for innovative funders;
- There’s an estimated R6b to R346b SME credit gap in the South African market;
- The SME funding environment is perceived as high risk and high cost;
- The report recommends great adoption of fintech solutions to drive down the transactional costs associated with funding this sector where there are large volumes of smaller sized loans;
- Start-ups and micro businesses are the most underserved in the formal business funding market because they are perceived as high risk;
- SMEs lack the knowledge needed to raise funding – which is where an event like FundEX fills a need;
- Lack of skills form a barrier to accessing finance – which explains why Riversands Incubation Hub’s finance coach is much in demand!
- Finance readiness is a big issue for SMEs: all funders require documents such as up to date financial statements, budgets, forecasts and tax clearance certificates.
- The twin requirements of a healthy credit record and collateral were found to be a stumbling block for SMEs. The report recommends the development of alternative credit scoring models designed specifically for the SME market.
FundEX aims to circumvent some of these issues by providing comprehensive information on funding. But there’s clearly a lot more work needed in the funding market to get money flowing to SMEs.