The same way financial products have been designed for corporates, for individuals, for agriculture, and so on, it’s time for a relevant design of products and services for the SME market. Agriculture commodities have a listing on boards for the marketing and for commodity pricing. Agriculture finance has products specifically designed for the various stages of (primary) farming; planting and harvest. There’re even products supported by predictive technology on crop size, to determine suited financing structures.
Individuals have so many products designed for them, including banking products, digital wallets, long-term and short-term savings, investment products, and others. As banking and access to banking evolves, there’s a continued innovation of products to suit the markets targeted. So, what will it take to really develop a boutique of products that cover SME needs? – not products that are simply a micro version of something that was previously created for a larger corporate, but rather a bespoke solution? I’m yet to come across banking (and lending) products that provide data on the enterprise’s growth and evolves either in duration or in cost, or repayment profile.
With the National Development Plan predicting that by 2030 SMMEs will generate 90% of the 11 million new jobs aimed for, the importance of SMEs to the South African economy cannot be underplayed. Analysis done on job figures showed that new businesses created 28% of all jobs in the last four years, with 86% of these jobs being created by fast growing businesses. This aligns with global research findings that highlight the importance of young and high growth firms in creating new jobs. One of the major hurdles to growth is funding for SMEs. while SMEs need to make some improvements to better their prospects to secure finance, there’s an equally (if not higher) amount of effort required from lenders to revisit the product base and its suitability to this segment of the economy.
Developments in the banking sector, financial services industry, and in technology and innovation promise some interesting trends in SME development. The same way that retailers, mobile telcos, and new digital banks have disrupted the banking landscape, I look forward to that disruption in SME finance. There’s a need for consolidation and disruptive innovation to bring out new products that boldly says “For SMEs“and Entrepreneurs”).
This market as a client base holds many opportunities. Exciting times ahead!
By Dinao Lerutla