{"id":44081,"date":"2013-08-13T11:47:15","date_gmt":"2013-08-13T09:47:15","guid":{"rendered":"http:\/\/businesstech.co.za\/news\/?p=44081"},"modified":"2013-08-14T09:12:26","modified_gmt":"2013-08-14T07:12:26","slug":"lending-to-sa-smes-limited-world-bank","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/banking\/44081\/lending-to-sa-smes-limited-world-bank\/","title":{"rendered":"Lending to SA SMEs limited: World Bank"},"content":{"rendered":"

While competition for retail lending has increased markedly in South Africa in recent years – partly because of new banks entering that space – lending to SMEs\u00a0remains limited, according to the World Bank<\/a>.<\/p>\n

This was part of the findings from a new paper research paper titled Bank Financing of SMEs in Five Sub-Saharan African Countries: The Role of Competition, Innovation, and the Government<\/em>.<\/p>\n

The financial institution admitted that, while cross-country evidence on the drivers of bank financing for SMEs is extensive, detailed information for Sub-Saharan Africa remains limited.<\/p>\n

It used data from bank surveys for a total of 62 commercial banks in four countries: Kenya, Nigeria, Rwanda, and South Africa. Aggregate data was collected and bank interviews were also held in Tanzania.<\/p>\n

All surveys were completed between 2010 and 2012.<\/p>\n

The analysis showed that the share of SME lending in the overall loan portfolios of banks varies between 5% and 20%, with banks in Kenya, Rwanda, and Tanzania\u00a0 being more involved with SMEs in terms of the share of their loan book going to SMEs than banks in South Africa and Nigeria.<\/p>\n

The research showed that SME\u2019s share of total bank lending in Kenya represented 17.4%, while in Rwanda it was 17.0%. In Tanzania it was 14% and in South Africa it represented 8.0%. Nigeria was last out of the five countries at 5.0%.<\/p>\n

\u201cThe evidence suggests that competition, especially as introduced by innovators, is important to encourage banks to venture into the SME space and to move them out of their comfort zone,\u201d The World Bank said.<\/p>\n

\"Bank<\/a>

Bank involvement with SMEs<\/p><\/div>\n

World Bank noted that competition in the SME market segment is strongest in Kenya where a large number of commercial banks are targeting different market segments.<\/p>\n

\u201cThe difference between Kenya and\u00a0most other Sub-Saharan African countries in that regard is that innovation started through a\u00a0combination of microfinance-rooted institutions scaling up to becoming commercial banks and\u00a0innovation with lending models and technology in the retail banking segment by other\u00a0institutions,\u201d it said.<\/p>\n

In Nigeria and South Africa such competition through innovation has still not taken place, World Bank argued.<\/p>\n

In South Africa, the major private sector commercial banks were interviewed in 2010, as
\nwell as niche banks focused on the SME sector and other institutions with broader development mandates.<\/p>\n

In total, eight institutions were surveyed, including four commercial banks, representing about 90% of banking sector assets.<\/p>\n

The extent to which commercial banks lend to SMEs depends on a range of country- and
\nbank-specific factors, World Bank said.<\/p>\n

According to the World Bank, among the main factors impacting bank financing for SMEs are, inter alia:<\/p>\n