Improving SMMEs Access to Funding Opportunities


Small, Medium and Micro Enterprise (SMMEs) play an important role in fostering accelerated economic growth, providing a source of employment and industrialisation within several economies. According to the World Bank Group, SMMEs account for 90% of businesses and contribute up to 40% of national income (GDP) in emerging economies.

A lack of access to funding opportunities remains a dominant constraint for many SMMEs in developing countries. Most SMMEs are unlikely to obtain bank loans, in comparison to the ease of access for large firms. Research done by the Middle East Investment Initiative (MEII) indicates that roughly 63% of micro, small and mid-sized enterprises (MSMEs) are unable to access funding opportunities, and only 8% of lending goes to the SMMEs sector. This is mainly a result of SMEs not meeting compliance requirements. Moreover, the Covid-19 pandemic has exacerbated the financial challenges that SMMEs face.

To cushion SMMEs facing financial constraints, local commercial banks, and multilateral regional development banks such as the Asian Development Bank (ADB) and the African Development Bank (AfDB) are providing loan assistance to SMMEs. For instance, last year, the AfDB provided the South African government with a loan amount of R5 billion in its Covid-19 Response Support Programme by supporting enterprises in the formal and informal economy to withstand the devasting impacts of COVID-19.

To improve SMMEs’ access to finance, the National Treasury and the South African Reserve Bank (SARB), in partnership with other commercial banks, provided a Covid-19 Loan Guarantee Scheme to assist eligible businesses with loans during the pandemic. The scheme’s loans, which are disbursed by banks, can be used by businesses to pay salaries, rent and other operational expenses.

Access to funding opportunities and financing gap are still major constraints to the success of SMMEs. It is concerning that one of the primary reasons that banks reject SMME funding applications is due to poor consumer credit scores. Banks should therefore develop new credit assessment models that are centred on the re-payment/credit history of the business itself, rather than focusing on the business owner’s personal credit record, to determine the business’ credit worthiness.

SMMEs need sufficient funding to run their daily business operations. Governments and other vital institutions will need to implement more business and financial support programmes to ensure SMMEs survive beyond the Covid-19 pandemic and spur inclusive economic growth.

Did You Know?

Black Umbrellas and Mianzo Asset Management recently partnered to raise R100 million to provide growth finance to 51% black-owned SMEs in South Africa. The fund is known as the Black Umbrellas Mianzo SME Debt Fund.

Read more on how developing-market SMEs are counting on help from governments and multilateral lenders to keep afloat, here:

A full report, titled ‘Answering your questions about the COVID-19 Loan guarantee scheme’, can be accessed here: http://www.treasury.gov.za/comm_media/press/2020/COVID-19%20Loan%20Guarantee%20Scheme%20Q&A.pdf.

The 2020 SA SMME Covid-19 Impact Report can be accessed here:

Read more on improving SMEs’ access to finance and finding innovative solutions to unlock sources of capital here: