Prinolan Pillay, Emeritus Professor, Geoffrey Bick

Abstract

The GDP (Gross Domestic Product) contribution of Small, Medium, and Micro-Enterprises (SMMEs) in South Africa is significantly lower than that of developed markets. This discrepancy is based on inadequate access to formal finance as SMMEs are considered higher risk, which drives commercial banks to limit lending into this segment. In contrast, Mobile Network Operators (Telcos) have introduced FinTech services to compete with traditional banking products, but without significant capital for lending, only a handful of SMMEs have benefitted. The aim of this research was to explore how a strategic alliance between a commercial bank and an MBO (Mobile BigTech Operator) could be leveraged to improve access to formal finance for SMMEs in SA.
An exploratory qualitative approach was adopted, collecting data from a purposive sample of twelve experts, and analysing using NVivo software to identify common themes. Key findings from the study identified several critical factors, including: financial and digital literacy, assessment of SMME creditworthiness by FinTechs, the impact of perceived risk of SMMEs, trust, alignment of the risk/reward model with financial commitment, complementary capabilities, and the redesign of traditional SMME banking models. Recommendations are given for developing a Bank-MBO partnership model to address the SMME financing gap.