Transcript Finance products for SMEs

DEPARTMENT OF TRADE AND INDUSTRY
INCREASING ACCESS TO
FINANCE
Table of contents
• Strategic approach
• SME support since 1994
• SMME contribution to GDP
• SME finance initiatives
• Finance products for SMEs
• Finance needs of SMEs
• SME growth strategy
• Conclusion
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Strategic approach
• Create an enabling legal framework;
• Streamlining of regulatory conditions;
• Facilitating access to information and advice;
• Facilitating access to marketing and procurement;
• Facilitating access to finance;
• Providing training in entrepreneurship & management skills; and
• Facilitating access to appropriate technology.
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Strategic approach
• Strategy covers both pre and post start up phases and is based on the
following pillars:
Strategic Actions
Strategic Pillar 1:
Increase in supply for
financial and non-financial
support services
Collaborative
Approaches
Streamline resources form
the public sector and
crowd in private sector
resources
Strategic Pillar 2:
Strategic Pillar 3:
Creating demand for small
enterprise products and services
Reduce small enterprise regulator
constraints
New Policy Directives
Enabling Environment
Public sector procurement strategy
and BEE codes of good practice as a
lever increased demand
Establish a regulatory impact
assessment framework and
Business Environments monitoring
mechanism
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SME support since 1994
• Easing the regulatory compliance burden on SMEs;
• Access to finance;
• Business development services;
• Youth enterprise development;
• Support for women owned enterprises;
• Incubation and technology acquisition and transfer of services;
• Productivity enhancement measures and support;
• Sector-focused support measures; and
• Skills development measures.
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SMME contribution to GDP
• 65% of all jobs created in the economy can be attributed to the SMME sector
• Small business contributes between 35% to 50% to the South African GDP
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SME finance initiatives
• SA Micro Finance Apex Fund – provides micro loans and support
to the social capital mobilisation
• Khula Enterprise Finance – provides general funding to SME market
• National Empowerment Fund – offers a wide range of start-up,
business growth and rural and community upliftment financing products
• Industrial Development Corporation – provides sector focused
funding ranging from $10K upwards
• Youth Fund – Agency dedicated to youth development
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Finance products for SMEs
• Credit indemnity product – partnerships between Khula and
country’s major banks wherein Khula provided indemnity cover to
Banks on behalf of qualifying SMEs
• Portfolio indemnity product – partnership between Khula, Dept of
Agriculture and major banks wherein banks are covered for providing
production inputs and equipment finance to qualifying SME in the
agriculture sector
• Business Loans – Khula provides wholesale funding to RFIs for onlending to qualifying SMEs. Loans range from $1K to $300K.
• Micro loans – Samaf provides micro loans from $100 to $1K
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Finance products for SMEs
• Land Reform Empowerment Facility - wholesale financing facility
via Banks and other RFI’s targeted at supporting black emerging
agricultural entrepreneurs from historically disadvantaged communities.
Loan size up to $1 million
• Local Enterprise Funds – Partnership between Khula and Local
Development Corporations to stimulate economic activity in priority
provinces – Loans up to $10K
• Youth Fund – Government Fund dedicated for youth and women
development. Funds projects up to $3000K
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Finance products for SMEs
• Public Private Partnerships Funds
-
Mining Fund ($20m) with Anglo American to fund junior mining
projects (up to $200K per project)
-
Start-Up Fund with Business Partners ($15m). This fund focuses
mainly on start ups and early expansion (up to $30K per project)
-
Agriculture Fund ($10m) with second major sugar mill in the
country. (up to $50K per project). Off take agreements in place.
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Finance products for SMEs
- Enablis Network Funds ($5m) – partnership between Khula and
Enablis Foundation. Two Funds, one focused whilst the other is a
general fund. Entrepreneur to belong to the network and achieve
certain rating before funds can be disbursed.
-
Women’s Fund ($20m) – partnership between Old Mutual Asset
Managers and youth fund to finance women owned businesses (up to
$5000K per project).
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Finance products for SMEs
• Reverse Factoring Product
Partnership between Khula and Regent Factors ($10m) in terms of
which Regent provides reverse factoring product to qualifying SMEs.
• Leasing Product
MOU entered into between Khula and private sector entity ($10m) in
terms of which computer and office equipment will be leased to
qualifying SMEs.
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Financial needs of SMEs
• Access to finance;
• the ability to make transactions - suitable transactional banking
products;
• Making of investments;
• Insurance and assurance products;
• Brokerage services; and
• Financial advisory services.
These can be made possible by technology
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Growth strategy
Grow small businesses by addressing access to finance constraints:
– Pursuing innovative ways to increase lending to small businesses;
– Deploying best practice innovation;
– Partnering with local and provincial government, as well as private
enterprise; and
– Incubator funding schemes, particularly targeting business
development in priority growth sectors.
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Growth strategy
Create business development opportunities:
– Working with government and the private sector, establish a ‘onestop shop’ solution for small businesses that supports:
• the linking of institutional demand to small business supply;
• assistance for SMEs with tenders and business acquisition
processes & regulatory services;
• skills development (mentoring);
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Growth strategy
• affordable finance provision;
• Invest in rural infrastructure such as information communication
technology, energy and and transport which would attract
funders to locate and provide financial services to these remote
areas; and
• efficient and convenient basic banking services, especially in nonurban areas or mobile contexts.
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Conclusion
• Prospects for SME development and growth are good;
• Renewed focus on SMEs by both public and private sector;
• Scale up of interventions by the DFIs and commercial banks;
• Better cooperation amongst DFIs; and
• Increased awareness of official programmes by SMEs, banks, DFIs,
and other stakeholders.
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