Background – A positive environment for small businesses that can provide both jobs and income is critical for poor South Africans, whether they are entrepreneurs or employees. Many of these companies, however, do not develop a solid footing, and one of the main reasons for this is limited access to financial services. The most common barrier that small business face when applying for financing from commercial banks is that they often lack the necessary collateral and personal contribution to secure the loans. Financial institutions argue that the risk of lending to small businesses is high, considering that many of them fold before three years have passed. The SMEs may also lack the necessary credit-worthiness to gain access to loan financing. On the demand side, small businesses often cannot access information on the requirements of financial institutions and the various credit products and services that are available to SMEs (as indicated in a survey of SMEs conducted by the project in February 2009).

Project – To address these challenges, the project introduced a mentorship program focused on mitigating risk and reducing the failure rate of small businesses, making financial institutions more likely to consider granting loans to small business applicants. The goal of the mentorship program is to show that access to finance can be easily realized—with proper selection and diagnosis of small businesses, effective risk mitigation tools, adequate training of SMEs on business management, and continuous aftercare support. To date, 60 small businesses have received pre-mentoring interventions that will prepare them to access funds from suitable financial institutions.

The project has also developed effective outreach strategies and information dissemination channels in the form of business expos, workshops, newspaper awareness campaigns, and small-business talk shows on community radio stations. This effort aims to ensure that small businesses have easy access to information that will help them improve their competitiveness. So far, six small business expos have been held in six different townships, reaching a total of 2,000 small businesses.

Adolphina Setsena
“I have a small business called Proyouth Naturals. I produce natural skin products and sell them to retailers. Being selected as one of the 60 beneficiaries of the Swisscontact mentorship program will definitely open up more doors for me and help me grow and expand my business—I’m very excited and positive about the future.”