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.