![]() ![]() ![]() What would stem from this is the SME fund named the Vumela Fund. ![]() The objective was to create an innovative and sustainable model for a financially and operationally independent investment business to invest in SMEs in South Africa. Understanding the need for innovative funding mechanisms for SME growth, FNB Business Banking imagined a means to provide SMEs with access to funding unrestricted by the prudential regulations of traditional banking. By diversifying SME funding in South Africa, we can address the capital gaps that exist in the SME funding ecosystem and provide funding solutions for every stage of the SME life cycle. ![]() This requires that we develop new and innovative ways to fund high-potential SMEs. This in turn presents challenges on the demand side, as SMEs may be reluctant to seek or cannot access credit due to the reams of financial documentation and collateral requirements that banks need for SMEs to obtain a loan, not to mention the high interest rates on these loans.įor SMEs to contribute to innovation, employment and overall economic growth, we need to broaden the range of funding mechanisms available to them. As Mike Sage explains, “in the more regulated banking environment you need quite a lot of track record, you need a balance sheet, you need equity, you need cash flows to prove affordability and all these kinds of things”. However, bank finance can pose challenges to SMEs.The obstacle on the supply side is the shortage of formal SME banking products that can sufficiently cater to the various stages of the SME life cycle due to the perceived riskiness of SMEs combined with the shortage of obtainable financial data and credit information. Traditional bank finance is a common source of SME funding as many small businesses depend on traditional debt to fulfill their funding needs. ![]()
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