1. BUILD TO GROW Shaping SMME Wholesale Lending
19 April 2013

2. Our experiences
Insufficient working capital needs: on-lending facility subsidising working capital especially in the RFI/MFI
Slow start up and slow take up
Profitability expected in the short term
Lack of understanding of the economic model in RFIs / MFIs / Specialised Funds
Pricing for risk vs. mandate vs. sustainability of the business – credit guarantee scheme
Insufficient involvement by sefa – MFI is a challenge
Mindset and monitoring of investment “arms length approach”
Debt funding model supported by adhoc grant funding
Lack of accountability by beneficiaries of grant monies

3. Present mindset - CONFUSION
RFI/MFI
# of clients / loan book balance
On-lending
Grant funding
Institutional
strengthening
Time Short / Medium

4. DEVELOPMENTAL SCORECARD including
Wholesale / Retail lending split
SURVIVALIST
MICRO
SMALL
MEDIUM
R5 million
R500
R50 000
DIRECT LENDING DIVISION
CO-OPERATIVES / MICROFINANCE INTERMEDIARIES / RETAIL INTERMEDIARIES / BANKING & FINANCIAL SECTOR / SPECIALISED FUNDS
R100 million
WHOLESALE LENDING DIVISION
DEVELOPMENTAL SCORECARD including
JOB CREATION / ENTERPRENEURIAL / BBBEE / REGIONAL / ENVIRONMENTAL

5. What our intermediaries do?

6. Continued

7. # of clients / loan book balance
Build to grow - RFI
Proposed
# of clients / loan book balance
On-lending
Equity
(Grant funding /
Donor )
Institutional
strengthening
Time Medium / Long

8. # of clients / loan book balance
Build to grow - MFI
Proposed
# of clients / loan book balance
Equity
(Grant funding / Donor)
On-lending
Institutional
strengthening
Time Medium / Long

9. Financial opportunity
Mindset: Build to grow……
CAPITAL INVESTMENT
INSTITUITIONAL
SUPPORT
ON-LENDING FACILITY
Financial opportunity
Financial support
Access to finance
Access to finance, financial support and financial opportunity is the backbone of SMME development which together presents an opportunity to address the issues of employment creation, poverty reduction and economic growth to bring about greater equality to all South Africans.

10. Working model for success
Long term view towards sustainability Catalyst towards broad based economic empowerment Potential to grow in specific markets and or sectors Scalability and national reach Strong management and leadership Regulatory compliance and governance Developmental agenda Cost to serve by understanding the financial impact Subsidised (grant) funding should be better managed Institutional support to build sustainability Close oversight and participation by sefa

11. Wholesale Lending Performance driven Centralised Improved skill set
Relationships supported by closer post investment monitoring
Centralised
Service delivery and efficiency
Improved skill set
External appointments to bolster capabilities / competencies
Specialists expertise
New ways through partnerships
Build to grow
Stronger relationships and direct involvement in businesses
Better understanding of market needs
Knowledge and expertise in R&D

12. Focus and attention - Client
SME Intermediaries
Retail Intermediaries
Review and consolidate/merge – recapitalise
Create new products and services
Banks and other Financial Institutions
Reviewed credit guarantee scheme relaunch
Develop marketing opportunities for growth
Specialised Funds
Extend niche market and sector reach
Land Reform Empowerment Fund
New agreement
Labour intensive markets

13. Focus and attention - Client
Microfinance Intermediaries
Retail Intermediaries
Consolidate/merge – recapitalise
Create new products and services
Co-operatives
Co-operative Bank Development Agency (“CBDA”) National Treasury: Regulator
Co-operative Development Agency (“CDA”) Dti: Promote and develop
On-lending new strategy
Stokvels
New development and strategy (Apex institutions)

14. Servicing client needs
Post Investment Monitoring
SME
Specialised Funds
Co-Operatives
Credit Guarantee Schemes
Agriculture and Land Reform
Microfinance

15. Product offering Product Description Business Loans
Partnership with intermediaries for on-lending to SMMEs.
Specialised Funds: Joint Ventures and Partnerships
Partnership with mainly private public sector entities for on-lending to SMMEs.
Credit Guarantee Scheme
sefa provides guarantees to banks and financial institutions, enabling loans to small businesses that do not otherwise have sufficient collateral/security to support facilities.
Land Reform Empowerment Fund (LREF)
Facility through which sefa lends money to commercial banks and other reputable agricultural lenders for on-lending to land reform beneficiaries including production, moveable assets, equity etc.

16. Non financial services
Product
Description
Post-loan business support
This service is only provided to SMMEs that have benefitted from facilities provided by sefa and its financing partners as a risk mitigating intervention (e.g. sefa provides a mentor to a small business to assist with specific aspects of running the business)
Institutional strengthening
Aimed at providing institutional strengthening and technical assistance to intermediaries (e.g. funding provided to an intermediary to assist in improving its operational management needs)

17. Credit Guarantee Scheme
R3.3 billion budgeted
R1.400 billion
SME
R630 million
Microfinance
R165 million
Co-operatives
R300 million
LREF
R790 million
Credit Guarantee Scheme

18. Hurdles to overcome Consolidation and merger process Cultural issues
Repayment / Entitlement / Trust relationships
Alternative security
Financial vs. Social return
Risk sharing and pricing to end user
Skill and expertise development including technical
Collaboration and partnerships: –
national, provincial, and local
private sector