7
November 2024

Fast Growing SME Funding Industry Acts to Self-Regulate

Thando Sikhosana
Staff Writer
In this article
As the SME funding industry in South Africa rapidly grows, it's taking steps to self-regulate and ensure better access to capital for small businesses. Learn how the industry is evolving and the key actions being taken to address challenges in the micro-lending space.
Get Fresh Insights & Tools, Monthly
Business growth insights and resources straight to your inbox

Fast Growing SME Funding Industry Acts to Self-Regulate RMI

Ensuring that small businesses have access to funding and working capital is a top priority in South Africa. The micro-lending space, where much of this funding occurs, has faced numerous challenges.

However, a new and rapidly growing industry comprised of merchant cash advance companies and SME finance firms is determined to approach things differently.

The South African SME Finance Association (SASFA) has published a code of conduct outlining its roles and responsibilities to protect customers and prevent the industry from encountering the same issues as micro-lenders.

“One of the challenges in this industry is that there are low barriers to entry and it can be a high-margin business,” says Karl Westvig, CEO of Retail Capital. “It is also a fairly unregulated industry since deals fall outside the National Credit Regulations.”

“It is crucial that we establish best practice guidelines on pricing, disclosure, risk assessment, and collections, among other things,” says Dov Girnun, the CEO of Merchant Capital, who is also a member of SASFA.

The local association is similar to The Association of Alternative Business Finance (AABF) in the UK, which was launched in February to promote best standards across the small business lending space.

Founding members of AABF include Capify UK, Catalyst Finance, Credit4, Fleximize, Liberis, the Just Loans Group, and YesGrowth. Members are required to adhere to four key operating principles: transparency, responsibility, fairness, and security, along with a code of conduct based heavily on the British Bankers Association Lending Code.

Founding members of the SME Finance Providers in South Africa include Retail Capital, Merchant Capital, and Lulalend. They provide essential financial products to SMEs to support growth, expansion opportunities, and emergency or seasonal cash flow needs.

Get Fresh Insights
and Tools, Monthly

Cash Advance Calculator

Use our online calculator to estimate your advance amount and repayment terms, helping you make an informed decision.

How much would you like to borrow?

R

Error message

How many months?

1
3
6
9
12

Daily repayment

R 00.00

Monthly repayment

R 00.00

Total repayment

R 00.00

These are indicative amounts only.
All offer amounts and costs are based on your monthly turnover and credit standing.