Lending of banks to small businesses queried

THERE might be a need to look into whether the financial services charter for black economic empowerment (BEE) had delivered in light of persistent complaints that small enterprises find access to bank finance difficult, Trade and Industry Minister Rob Davies has said.

He was responding to a question at a dialogue on Monday organised by Business Report and Brand SA.

The chief executive of a small enterprise that had applied unsuccessfully for finance from banks had asked:

“I have not worked before. So, I am told: ‘How can we trust you with our money when you have not earned money before?’”

The BEE code of the banking charter provides a roadmap on how to build on existing achievements to benefit all stakeholders.

One of the aims of the charter is to advance transformation through the financial sector contributing to the development of the country by financing low-cost housing and small business.

Financial sector trade associations, which sit on the financial services charter council, have complained that banks are not responsive enough when it comes to these commitments.

Davies pointed out the reason to look into the delivery of the charter was because banks and other financial institutions are part of it. He said South Africa also needed strong finan- cial development institutions (FDIs). “All countries involved in manufacturing have strong FDIs,” Davies added.

Former Reserve Bank governor Tito Mboweni raised the issue last year when he said that the country’s largest banks were not doing enough to boost investment needed to transform an economy moulded by apartheid until 1994.

He said that the government should consider buying one of the country’s banks to boost access to finance for citizens and businesses.

In her budget speech on Tuesday, Gauteng MEC for Finance Barbara Creecy said as part of the banking tender process, which was still under way, all banks had been requested to provide a clear strategy on how they intended to support the development of township enterprises.

Peggie Drodskie, the acting chief executive of the SA Chamber of Commerce and Industry, said yesterday that access to bank funding for small enter- prises was a serious problem.

“We are working with the Small Enterprises Finance Agency and the Department of Small Business Development on a process to establish a rating agency for SMMEs (small, medium and micro enterprises) which will assess the sustainability of a business to repay its loan,” said Drodskie.

“At the moment, banks will not lend if a business has a negative rating. The agency will work on sustainability despite the negative rating.”