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INCREASING ACCESS TO FINANCE. DEPARTMENT OF TRADE AND INDUSTRY. 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. Strategic approach. - PowerPoint PPT Presentation
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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
2
3
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.
Strategic approach
Strategic Actions
4
Strategic Pillar 1:
Increase in supply for financial and
non-financial support services
Strategic Pillar 2:
Creating demand for small enterprise products
and services
Strategic Pillar 3:
Reduce small enterprise regulator constraints
• Strategy covers both pre and post start up phases and is based on the following pillars:
Collaborative Approaches
Streamline resources form the public sector and crowd in private
sector resources
New Policy Directives
Public sector procurement strategy and BEE codes
of good practice as a lever increased demand
Enabling Environment
Establish a regulatory impact assessment framework
and Business Environments monitoring
mechanism
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.
5
SMME contribution to GDP
6
• 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
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
7
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 on-lending to qualifying SMEs. Loans range from $1K to $300K.
• Micro loans – Samaf provides micro loans from $100 to $1K
8
Finance products for SMEs
9
• 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
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.
10
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).
11
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 ProductMOU entered into between Khula and private sector entity ($10m) in terms of which computer and office equipment will be leased to qualifying SMEs.
12
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
13
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.
14
Growth strategy
15
Create business development opportunities:
– Working with government and the private sector, establish a
‘one-stop 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);
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 non-urban areas or mobile contexts.
16
Conclusion
17
• 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.