The SA business banking market is undergoing its most transformative period in decades, with a flurry of innovative credit products going to market rapidly as the biggest banks battle it out for a larger slice of market share in the small and medium enterprises (SME) lending space.
Fintech groups, which have over the past decade kept traditional banks on their toes by bringing new SME lending propositions to market, are also set for a boost with the Reserve Bank poised to open up the national payment system, which has long been the exclusive terrain of established lenders, to new players.
African Bank last week launched its fully online micro, small and medium enterprises lending platform, which will give businesses access to term loans, revolving lines of credit and invoice financing, with funding of up to R5m.
Zweli Manyathi, CEO of business and commercial banking at African Bank, said finance fees would only apply to the portion of the loan facility used. “Too many viable enterprises continue to be excluded from the financial system, not because they lack potential but because they do not fit old models,” he said.
The resurgent African Bank has over the past three years made a series of acquisitions to strengthen its business banking proposition.
Too many viable enterprises continue to be excluded from the financial system, not because they lack potential but because they do not fit old models.
— Zweli Manyathi, CEO of business and commercial banking at African Bank
The company bought Grindrod Bank for R1.5bn in May 2022, accelerating its entry into the SA business banking sector. The transaction introduced more than R12.5bn in funding liabilities, most of which were business deposits. That was followed by the R3.2bn purchase of Sasfin Bank’s commercial equipment finance and commercial property finance units.
FirstRand’s FNB, SA’s largest SME lender, is not resting on its laurels as its rivals fine-tune their strategy aimed at taking its market share.
The lender recently took to market a product it hopes will solve one of the biggest cash flow headaches for SMEs doing business in SA: late payment of invoices, particularly from government departments.
The bank’s response to this challenge is its Selective Invoicing Discounting (SID) trade credit solution. Gavin Tarr, head of working capital solutions at FNB Commercial Structured Finance Solutions, said SID would offer the bank’s commercial and business customers the chance to sell their unpaid invoices to help unlock their cash flow, while awaiting payment from approved debtors.
Key Takeaways
- SA’s SME banking sector is innovating rapidly.
- New loans and invoice financing improve funding access.
- Revenue-linked and selective invoicing solutions support cash flow.
- Opening the national payment system boosts competition.
- Flexible finance strengthens SMEs, vital to SA’s economy.
“The SID solution will pay customers up to 80% of the invoice amount upfront, while they await their debtors’ payment,” Tarr said. “We are giving businesses immediate access to the funds they need to operate and grow, instead of spending valuable time on administrative effort to ensure invoice payments and reconciliation from their debtors.”
Revenue-based credit products for SMMEs have increasingly been taken to market. Standard Bank has BizFlex, an unsecured loan built with SMEs in mind. One of the features of BizFlex is that the loan’s repayment structure is directly linked to a percentage of total revenue selected by the business and earned via its business current account.
Capitec, which has identified SME lending as its next growth frontier, is also working on a credit product for the sector linked to businesses’ cash flows, which is expected to be launched before year-end.
The Stellenbosch-based lender, which has had remarkable success in retail banking, amassing nearly 25-million clients since going to market in the early 2000s, aims to replicate this success in business banking.
One of the competitive advantages it believes it has is the pricing of its point of sales (POS) machines. “Our POS business has an easily understandable commission structure with some of the lowest rates in the market,” Capitec said.
Nedbank last month bought fintech innovator iKhokha for R1.65bn.
iKhokha offers mobile POS card machines, a payments app and business management tools for SMEs.
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