Wednesday, October 15, 2008

SA Small Business Funding: When will the banks come to the party?

Regular readers will be familiar with my regular rants against the lack of small business support from South African banks. With an issue that can so obviously make a significant difference in areas such as job creation, increase in GDP, the development of technology and the influx of foreign investment in to our country, it is fascinating that banks are not falling over each other to provide more funding and service to small firms. How short sighted can they be? It seems obvious that despite the risk that exists when investing in small firms the long term benefits of gaining them as clients and strengthening the countries economy far out weighs the risk.

Small firms need bank support not only to fund their SA business plans but for day to day cash-flow support.

In a recent article in Business Report ( Polo Radebe commented that "we have seen a plethora of initiatives aimed at micro enterprises. Significant resources are directed at larger, sophisticated clients and micro enterprises, leaving the SME space underserviced. Development practitioners often call this gap the missing middle.

Despite the government taking some much need action to address this issue by establishing institutions such as Khula Enterprise Finance. Khula states that its role is to maximise access to finance for SMEs in a way that leads to the development of sustainable small and medium businesses, job creation, economic growth and equity, it is now time for the banks to come on board once and for all.

Recent economic bailouts in the UK even went as far as to specify that banks will be backed by government bailout initiatives on the condition that more loans and better service is provided to small and medium size businesses. Can we expect a similar show of support for small business from the SA government?

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