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Symposium Explores Opportunities For Mainstreaming Partial Credit Guarantees in Southern Africa

Shared Interest hosted a symposium on November,  exploring opportunities to enhance local capital markets through partial credit guarantees in  Southern Africa. Hosted at the Maslow hotel in Sandton, the symposium highlighted the  challenges faced by Small, Micro and Medium Enterprises (SMMEs) in the region. In South  Africa, 60% of the workforce is SMMEs contributing 34% to the gross domestic product (GDP).  However, 85% operate informally and a good majority, lack access to financial services. 

The role of organizations that offer partial credit guarantees such as Shared Interest is crucial  as only 26% of bank lending in South Africa goes to SMMEs seeking loans, compared to other  countries such as Turkey (36%), Brazil (40%), and China (63%).  

At the symposium, Acting Director General for the National Department of Small Business  Development, Thulisile Manzini, emphasized the importance of the financial stability of SMMEs  as not only an economic necessity but also a key element for equitable progress. Highlighting  the urgency of the matter, the International Financial Corporation (IFC) revealed a substantial  R300 billion funding gap for SMMEs. Nonetheless, an estimated 60% uptake of partial credit  guarantees, offers hope and serves as a testament to their recognized significance in reducing  the risks tied to lending to SMMEs. 

Shared Interest, a non-profit organization dedicated to expanding financial access for Black owned and women-led SMMEs, spearheaded the symposium. The event brought together  lenders, Development Finance Institutions (DFIs), government representatives, banks,  microfinance institutions and SMMEs to discuss how partial credit guarantees can energize  local capital markets in Southern Africa.

The symposium included three impactful panel discussions on ways in which partial credit  guarantees can better promote risk-managed loan portfolios. The panelists discussed the  purpose and mechanics of partial credit guarantees, guarantee fees, and barriers to their  

adoption. It also discussed innovative strategies for financial inclusion and specific  enhancements needed for optimal effectiveness. 

SMMEs play a vital role in South Africa’s economy but often struggle to access the necessary  capital due to a lack of assets required as collateral for loans. Since local sources of capital are  the primary option for most SMMEs, there is a need to unlock more of it to support these  businesses. Partial credit guarantees are widely accepted as an effective solution for increasing  SMMEs’ access to credit. The symposium aimed to harness the collective expertise of financial  sector stakeholders committed to empowering SMMEs financially and generating ideas to  mainstreaming partial credit guarantees. 

Dorcas Onyango, Global Director of Programs at Shared Interest, said, “Our mission extends  beyond providing partial credit guarantees. We also advocate for systemic changes within the  financial sector that can deepen the impact of partial credit guarantees on SMMEs’ financial  inclusion. The symposium’s success is a testament to our shared commitment to uplift SMMEs,  especially in a climate beset by global crises.” 

SMMEs require more support through catalytic capital. Shared Interest, with a 29-year legacy in  South Africa, showcased its impact in supporting more than two million individuals and  unlocking approximately R2 billion in local capital to confront economic inequality. 

The symposium featured a distinguished lineup of speakers, including the Acting Director  General for the National Department of Small Business Development, Thulisile Manzini, who  delivered the keynote address. Other notable speakers included representatives of The  International Finance Corporation (IFC), Standard Bank, Jobs Fund (National Treasury), Small  Enterprise Finance Agency, National Empowerment Fund, Virtue Business Solutions, Inyosi  Empowerment and Setana Capital. The event attracted a diverse audience focused on driving  inclusive growth in various sectors, including agriculture, gender equality, financial technology,  climate change, and social enterprise. 

During the event, the International Finance Corporation (IFC) emphasized that collaborative  efforts between credit guarantee organizations and lenders can accelerate the utilization of  partial credit guarantees, contributing to the expansion of SMME financial inclusion.

“SMMEs are crucial for economic growth and job creation, but they face many challenges that  hinder their growth, including regulatory obstacles and limited access to finance,” said Adamou  Labara, IFC Country Manager for South Africa. “Effective coordination between public and  private sector stakeholders is essential as it can result in improved outcomes for South African  SMMEs, enhancing their resilience and sustainability. As IFC, we welcome initiatives like this  symposium that bring together all stakeholders to collaborate on strategies that support the  success and growth of SMMEs.”  

Bank and non-bank lenders who attended the symposium highlighted a shared dedication to  fostering the success and sustainable development of SMMEs. They provided credit guarantee  organizations with insights into the barriers that impede SMME lending despite the availability of  partial credit guarantees and, Acting Director-General Manzini, during her keynote address,  reinforced the vital contribution of SMMEs to the nation’s prosperity. “There is a synergy here  today that resonates with our department’s aim to cultivate a thriving environment for SMMEs,  enriching their market participation and access to comprehensive support systems,” she stated. 

Ivan Oboth, the Founder of Mikono, a fintech company specializing in enhancing SMME  bookkeeping, addressed a crucial issue faced by lenders in assessing SMME credit worthiness  – the lack of proper business records. During his presentation at the symposium, Oboth  introduced an innovative tech-based solution that enables SMMEs to maintain better business  records. 

Oboth emphasized that the solution not only benefits the SMMEs themselves but also  addresses lending challenges for both borrowers and lenders. By providing a platform for  SMMEs to keep accurate and up-to-date business records, the solution helps overcome the  obstacle of a lack of credit history. This, in turn, improves the attractiveness of SMMEs to  lenders, making it easier for them to access the necessary credit. 

Through this innovative approach, Oboth aims to boost SMMEs creditworthiness and enable  them to secure the funding they require for growth and success. 

Adding a voice from the ground, an SMME business owner and Women’s Entrepreneurship Day  Organization (WEDO) Ambassador, Wendy Silinyana expressed her appreciation and  importance of financial inclusion for women entrepreneurs in order to close the gender finance  gap to support the growth of SMMEs.