DURBAN – Banking and financial services group Sasfin announced on Wednesday that it had obtained a R390 million funding line as well as a R600 million portfolio guarantee facility (Nasira) from Dutch entrepreneurial development bank FMO to provide loans to women, youth and Covid-19 impacted businesses.
Sasfin chief executive Michael Sassoon said this innovative financial programme aimed to promote inclusive growth, job creation and sustainable development in the country. “The facility comes with technical assistance from the Frankfurt School of Finance and Management to ensure the development aims are met.”
Sasfin said it was the first bank in the world to receive the Nasira guarantee provided by the EU. FMO provided guarantees to unlock lending to these entrepreneur groups that were typically regarded as higher credit risk. By “risk-sharing” Nasira reduced the risks of lending to vulnerable and underserved parts of the population.
FMO invests in businesses, projects and financial institutions, by providing capital, knowledge and networks to support sustainable growth and empowered entrepreneurs across the developing world.
Although South Africa has eased lockdown at level 1 small, medium and micro-sized enterprises (SMMEs) in the country have been hard hit by the lockdowns necessitated by the need to curb the Covid-19 global pandemic.
Sasfin’s recent Covid-19 SME Impact Survey showed the immense challenges that the pandemic placed on small businesses with as many as 73 percent believing they would not survive the lockdown.
According to McKinsey & Company, SMMEs across South Africa represented more than 98 percent of businesses, employed between 50 percent and 60 percent of the country’s workforce across all sectors and were responsible for a quarter of job growth in the private sector.
The CombatCovid SMME Survey commissioned by a consortium of SMME-focused organisations in May revealed that three out of four small, medium and micro-enterprises would not survive beyond July this year.
It also indicated that 68 percent of SMMEs were unsuccessful in their application for Covid-19 relief funding, with 71 percent claiming that they would need this cash injection to operate after the cessation of the national lockdown.
FMO’s chief investment officer Linda Broekhuizen said Nasira was better suited for this market, while Sasfin’s genuine focus on financial inclusion and innovative spirit made them the suitable candidate for the Nasira guarantee.
“We are thankful for Sasfin’s collaborative spirit throughout the process and for the way they embraced Nasira, knowing that also on FMO’s side, this was the first time that we were working on this program,” said Broekhuizen.
Head of Build the Bank at Sasfin Meagan Rabe said that the aim was to be a long-term partner to their clients beyond the role of a traditional bank.
“With this in mind, we are very excited to partner with the Frankfurt School and the FMO to enhance our tailor-made offering to SMEs, which includes new lending and non-financial products. The non-financial products include tools for an entrepreneur to run his business more effectively and hassle-free,” said Rabe.
EU deputy director-general for International Cooperation and Development Marjeta Jager said they profoundly believed that it was very important for the West to reach out to countries that needed help and the FMO had the expertise to use EU money to do that.
“The support of the EU and the Dutch government for Nasira is a major step towards ensuring that financing reaches underserved entrepreneurs. They are potentially great job creators in countries where employment is much needed, now and in the future. We believe increased coordination and cooperation between governments, development finance institutions and the private sector is a prerequisite to deal with the complex challenge of financial inclusion of young, female and migrant entrepreneurs,” said Jager.
In December 2018, FMO and the European Commission signed the agreement for the Nasira Risk Sharing Facility for an amount up to €75m for a period of four years. The facility targets mainly Tier 1 and Tier 2 financial institutions, and Tier 1 microfinance institutions in the sub-Saharan Africa and European neighbouring countries.
By catalysing other investors, the programme was expected to support a staggering €500m in financing.
BUSINESS REPORT