Johannesburg - Khula Enterprise Finance would lend directly to small black businesses to help entities shunned by banks, the state-owned wholesale financier said yesterday.
Khula provides loans to small, medium and micro enterprises (SMMEs) through major banks, non-bank institutions and joint ventures. It also provides credit guarantees for small business without collateral - a must-have when seeking a bank loan. Khula is regulated by the Financial Services Board, the National Credit Regulator and the Public Finance Management Act.
In the financial year to March, the lender disbursed loans worth R746 million, an increase of 60 percent from the previous period.
Speaking at the financier's 2006/07 results presentation, managing director Xola Sithole said the firm was working on plans to issue loans to small businesses, particularly those left out by intermediaries that disburse its loans. He did not, however, say how much money it earmarked for these loans.
"The natural outcome of the process of working to get closer to our ultimate market is to make a channel for entrepreneurs to directly approach the firm," Sithole said.
Khula had limited control on which small firms got loans, and as a result there were still entities left out. "There is still some perception that lending to SMMEs is risky," he said.
Bank lending remained unfavourable for SMMEs, as they felt the cost of lending to small firms was relatively high. Mainstream banks preferred to handle larger transactions, in which economies of scale were huge.
While banks accounted for 50 percent of the R462 million disbursed in the 2005/06 to small businesses, they only lent 36 percent of the R746 million in loans issued to small businesses in the past fiscal year. Of the loans given through banks, Absa disbursed 49 percent, First National Bank (FNB) 21 percent, Nedbank 16 percent and Standard Bank 14 percent.
Non-bank intermediaries issued about R300 million or 40 percent of loans, compared with their contribution of only 14 percent in the previous year.
Trade and industry minister Mandisi Mpahlwa also lamented the lack of funds for start-ups. "It's truly a shame South Africa has so little start-up finance," he said.
FNB's Michael Vacy-Lyle said a lack of historical information on small businesses has made it difficult for banks to issue loans.