1. TIPS’ study: Stephen Timm
Lessons from India and Brazil: How South Africa can boost support to small businesses?

2. Guarantee scheme lending:
Finance schemes
Guarantee scheme lending:
Khula vs CGTMSE (India)
Supply chain financing:
Cartão BNDES (Brazil)

3. Khula guarantee scheme
Set up in 1996
Highest number of loads: 797 loans in 2002
Number of loans evolved from 545 (2007)
but down to 53 (2010)
Problem areas:
Red tape;
Defaults keep banks away
Vs. Khula blames banks for low numbers
Banks warn Khula Direct = ‘disaster’

4. CGTMSE vs Khula Khula CGTMSE Loans 2010 Loan amount Default rate53
Loan amount
R30m
R10.4bn
Default rate
42.15%
2.5%
Default loans
80.1%
2.83%
Claims paid
27.56%
35.4%
Corpus
None
R4bn

5. Lessons for Khula
Lesson 1: Targeted lending
Lesson 2: Strong IT system
Lesson 3: Meet with banks
Lesson4: Improve claims process
Lesson 5: Sharpen applications

6. Cãrtao BNDES: Problem
Problem 1: SME struggle to access finance to buy raw materials, services
Problem 2: Suppliers don’t trust SME to buying goods on credit
Problem 3: Import-fronting rife

7. Cãrtao BNDES: What it is?
Credit card with e-commerce
Finance from R$1.2m to R$2.46bn
Local inputs rule: 60%
Reach:
buyers
suppliers
goods and services

8. Cãrtao BNDES Banks use it:
Lei Geral’s Article 58
Card fosters client loyalty
Attracts suppliers to bank
Four of five banks are state-owned
Buyers can approach supplier directly – supplier puts transaction through

9. Cãrtao BNDES: Advantages
BNDES screens suppliers, buyers
Encourages local content
Cuts down red tape
Gets banks to lend via government (though BNDES is very large and very unusual)
Uses internet as platform
Suppliers from existing BNDES fund

10. Cãrtao BNDES: DTI says Useful for working capital, overheads
Problem 1: Many micro businesses unbanked, in rural areas, low literacy
Problem 2: Challenge to get banks to enter as risks would be high
Zikode: ‘Need for PPP’

11. Summary
State must partner more with private sector, banks to reach small businesses through innovative methods
Simplify structure of financing – Khula, NEF, DFIs fall under IDC

12. Contact Details Stephen Timm 021 685 7915 083 330 4013