SA’s SME sector receives a 7-year R740m loan boost

SOUTH Africa’s fledgling small and medium-sized enterprises (SME) sector received a boost yesterday after the International Finance Corporation (IFC) extended a seven-year, R740 million loan to Mercantile Bank to lend to SMEs.

The IFC is a member of the World Bank Group.

Saleem Karimjee, the IFC country manager, said the lending to SMEs would have a bias towards women-owned businesses as they were still under-represented in the local market.

“With its unique market position and business focus, Mercantile Bank is an excellent partner in our quest to make a dent in South Africa’s unemployment challenge by offering access to finance to underserved and black-owned SMEs,” Karimjee said.

IFC and Mercantile had initially concluded a landmark securitisation transaction in 2014 in a deal valued at R240m.

The financing fell under the IFC SME Push Program, an initiative to expand lending and strengthen support for the SME sector by the formal banking sector.

The IFC said the SME Push Program would channel up to R40 billion in investment into South African SMEs over the next five to seven years through a comprehensive package including investments, risk-sharing facilities and advisory services.

Karl Kumbier, the chief executive of Mercantile, said the loan would not only allow the company to assist other businesses, but also enable it to expand its own business further.

“Over the past five years, the bank has doubled its lending to SMEs and with this loan it will be positioned to have a positive impact on an even larger segment of the sector,” Kumbier said.

According to some researchers, SMEs make up 91 percent of formalised business in South Africa, provide employment to about 60 percent of the labour force and account for about 34 percent of South Africa’s gross domestic product. However, a lack of funding has proved to be a major impediment to small businesses.