South African lenders, banks and the government should introduce more flexible and creative options to increase access to credit for small businesses, says Edna Montse, African Bank group executive for transformation and stability.
Montse told Business Times this week that while African Bank welcomes engagement with other stakeholders, it would not “sit and wait until policy improves” to increase SME credit access.
“We [must] figure out ways within regulation, within policy, that enable us to serve the underserved and the underbanked,” she said.
“Policy plays a key role in this. And so we’ve ensured that we, as part of our stakeholder programme … participate in engagements with state-owned departments and government departments to create more enabling policy. Perhaps we now look at collateral differently. Perhaps we look at the financial statements differently.”
Her remarks come as African Bank issued social bonds that focus on entrepreneurs running businesses operating within the sustainable development goals of the UN, including:
- poverty reduction;
- addressing inequality;
- climate change; and
- sustainable energy.
“The first issuance proceeds are directed at small and medium enterprises, because they are really the backbone of job creation. But we intend to have further issuances that will also enable renewable energy financing and contribute to the just energy transition so that we really help tackle some of our energy security challenges in South Africa.”
The first issuance proceeds are directed at small and medium enterprises, because they are really the backbone of job creation. But we intend to have further issuances that will also enable renewable energy financing and contribute to the just energy transition so that we really help tackle some of our energy security challenges in South Africa.
Montse said African Bank’s social bond sought to provide R700m to SMEs whose operations yielded socioeconomic benefits such as:
- job creation;
- social infrastructure development;
- housing; and
- renewable energy solutions.
“What we want to do is include and bring into the fold other entities — micro, small and medium enterprises — who could share the same journey that African Bank has been on, in terms of being inclusive, job creation, economic upliftment and so forth.”
The first social bonds for three-to-five-year periods were settled last month at a total of R700m, with more than R1bn in bids received on the opening day. Montse said investors had backed the bond with confidence.
Across departments, the government has preoccupied itself with interventions to increase access to credit for SMEs that might not have the assets to receive larger funding.
In 2023, the department of small business development unveiled a plan to allow such businesses increased access to credit by introducing a register of movable assets they could present as collateral.
Recently, the business community engaged with trade, industry & competition minister Parks Tau over his withdrawal of the National Credit Act regulations, and it has secured a verbal commitment from him that the credit access provisions that had been effectively cancelled would be reintroduced.
Business Unity South Africa (Busa) CEO Khulekani Mathe said it had written to the minister to raise its concerns about the withdrawal and the damage it was doing.
“The minister has been … in the US for much of the time when this unfolded," Mathe said. “But he did reach out to say that he acknowledges the damage that was done and that he has instructed his officials to work at reintroducing these amendments, also making sure that it clarifies what is being amended here, because the confusion was about things that were not being amended.
“We have not yet met or had a meeting with him, but he did send an official to meet with us and just reassure us that he understands the damage that was done and he is working to have the amendments reintroduced.”
Kaamil Alli, spokesperson for the department of trade, industry & competition, declined to comment.
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