Sme Financing Hurdles - The Banking Association South Africa

Report
SME DEVELOPMENT PRESENTATION TO
INDEPENDENT BANKS (Doc. #72018)
“UNLOCKING SME CREDIT AND UNLEASHING SME POTENTIAL”
SURVEY ON HURDLES TO SME FINANCING
11 August 2010
Fikile Kuhlase
Senior General Manager
Socio-Economic Growth and Development Division
SOCIO-ECONOMIC GROWTH AND
DEVELOPMENT DIVISION
2
■ Socio-Economic Growth and Development
Division – catalyst for change; does “business
unusual”
and
facilitates
the
institutionalisation of transformation.
■ FOCUS AREAS:
■ Financial Inclusion
■ SME DEVELOPMENT including nonfinancial support
■ Financial Literacy
■ Division’s Functional Strategy:
■ Empowerment
■ Transformation
■ Inclusion
□ (refer to Division’s z-folder)
CONTEXT –
Why SME Development?
South Africa’s financial sector has not met
demand for SME financing especially the lower
end of the SME market and previously
disadvantaged SMEs as they are considered to
be of greater credit risk and lack collateral and
financial business expertise.
“Missing Middle”, gap in capital : above microfinance and below traditional institutional
financing where SMEs are located and underserved
SME development is a priority area of the SA
government. Banking industry to align. Thus a
strategic objective of the Association.
3
SME Initiatives
4
■ Financial Sector Charter and BBBEE
■ Finance and Investment Committee - Credit Extension to
distressed SMEs (global crisis response) – NEDLAC
■ Financial Sector Program (FSP)– USAID
■ SME Financial Literacy – BANKSETA and FSP
■ Risk Capital Facility (RCF) – EU fund admin. by the IDC
■ Stakeholder engagement – Gauteng Dept. of Economic
Dev’t, IDC, Khula, SEDA, SAMAF, DFIs, dti, donors etc.
■ Research and Knowledge Management
■ “Downscaling”, inclusive banking & financial inclusion –
micro-finance, co-ops & coop. banks. Kenya study tour
Financial Sector Program
5
■ Objective is to expand access to financial
services and lower financing cost for small and
medium enterprises (SMEs)
■ Improve financial intermediaries capacity to serve
SMEs
■ Improve bankability of SMEs
■ Legal and regulatory framework reform financial
sector and business environment
■ Strengthen the SME finance knowledge management
system
■ The Banking Association SA is a prime partner of FSP
FSP PARTNERSHIP
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■ The Banking Association and USAID partnership
on Financial Sector Program (FSP)
■ To expand access to high-quality, affordable
financial products and services for SMEs.
■ Key Areas of Focus:
i.
ii.
iii.
iv.
Financial services
SME bankability
Enabling environment
Knowledge sharing
FI Survey on Hurdles to SME Financing
8
■ 18 Financial Institutions – banks, DFIs and
private equity funds participated in the online
survey
■ 9 banks - ABSA, African Bank, Albaraka, Bank of
Athens, FNB, Mercantile, Nedbank, Sasfin, Standard
Bank and Wizzit
■ Top 5 Hurdles Identified:
■ Financial status / cash-flow
■ Accurate financial records or statements
■ Collateral
■ Over-indebtedness
■ Business plans and business skills
■
■
■
■
■
■
■
■
■
■
MAJOR FINDINGS OF FSP SURVEY
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Review of evaluation criteria for SMEs
necessary
Inaccessibility – language, attitude and
responsiveness
Inappropriate SME products – lack of diversity
Complex application process
Lack of quality business development support
(grading and accreditation of BAs)
SME business skills to be developed
SME bankability – understanding of FI req.’s
Limited
understanding
of
regulation
–
company & VAT reg., FICA compliance, NCA…
Ineffective advocacy for SME sector – KM
Lack of access to IT infrastructure
WORK IN PROGRESS
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■ Business Development Support provision –
grading, accreditation and professionalisation
of Business Advisors
■ Regulatory reform – New Companies Act,
Basel II and III, NCA etc.
■ SME Product Development & SME Fin. Literacy
■ Knowledge Management – SME portal
■ Research on Micro-Finance, Cooperatives and
Cooperative Banking
■ Stakeholder engagement
PROPOSED INTERVENTIONS
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■ Products and Services – review guarantee funds,
■
■
■
ability to call on collateral, review credit assessment
tool/approach, develop SME specialists, designate SME
champion, reconstitute credit committees, minimise
approval turn-around time, provide mentoring, develop a
“real” SME product…
Business Development Support – establish
accreditation and grading institute, create panel of BDS
experts, set industry-wide BDS standards, professionalise
sector, develop generic SME financial literacy course,
develop online, open-source and interactive learning,
training needs assessment…
Policy and Regulation – identify inhibiting
regulations and laws, RIA, promote “one-stop” reporting
on SME statistics, lobby to prevent regulation ‘overload’,
support the creation of SME Ministry…
Knowledge Management – unify existing advocacy
groups est. BUSA SME policy committee, facilitate set-up
of SME forum, SME bank, design and develop SME portal
and data repository, research and knowledge sharing…
CONCLUSION
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■ SME Development is a catalyst for change, economic
growth and job creation
■ FSC achievement on black SME financing as at end of
2008 is R11.4 billion by the sector (R10.6bn by banks)
The target for 2003 – 2008 was R5 billion.
■ Final FSP Report on the “Hurdles to SME Financing” will
be published
■ Stakeholder engagement critical
■ SME Development is a major strategic thrust of the
Association and we encourage members that operate in
the SME space to be involved in the SME Committee
and industry SME initiatives.
□ THANK YOU!

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