FinFind, SMEs And Access To Finance In South Africa

Screen Shot 2013-02-01 at 11.48.38 AM

VENTURES AFRICA – FinFind is a USAID funded programme, housed within Finfind (Pty) Ltd. Finfind, won a national tender to roll out the programme in South Africa, which is a web-based guide to finance for small businesses. The company has rolled out the programme in all the major cities around South Africa. Globally access to finance for the small business owner has become a critical element for economic growth and, more so, stability. Generally access to finance for the small business owner in Africa is lagging.

Research shows the positive effect of access and use of formal financial services on economic growth and poverty alleviation.

Ventures Africa chats with Barry Wiseman, Director at FinFind about navigating this exciting and ever-changing environment.

VA: Why FinFind and what is different about this particular vehicle?

BARRY: Being a web based portal, Finfind brings together experienced consultants, the financiers and the small business owner – the SME owner can engage a consultant via the website to assist him with approaching financiers. The website contains a vast amount of information on the various types of funding products together with a wide range of financiers (small to large) to assist the consultant with his engagement with the SME owner. We are currently further developing the site to improve how we interact with the SME owner and to provide additional value add services.

VA: How is FinFind structured (operations)?

BARRY: Finfind is operated via a private company owned by four shareholders, all of which have had extensive experience in dealing with SMEs. Each of the shareholders has their own focused responsibility covering the consultants, the finance institutions, IT development and overall general management of the business.

VA: How many consultants are accessible to SME owners via FinFind and what is the depth of their varied experience?

BARRY: There are currently 66 registered finfind consultants spread across 3 provinces within SA viz. Eastern Cape, Western Cape and Gauteng. This year we will be approaching consultants based in KZN and furthering our footprint of consultants in the Eastern Cape and Gauteng. Over the next 2 years, the plan is to take on consultants based in all the 9 provinces.

VA: Is the market ready for FinFind?

BARRY: I definitely believe so – access to finance has been highlighted as one of the key constraints in the future growth of SMEs. What is key is that the small business owner needs to be aware of the other niche financiers out there, what they offer and how to approach them – finfind facilitates this process by bringing all three players together.

VA: I am a business owner and I need access to finance. Walk us through the FinFind model and process…

BARRY: If you have a financing need of R250 000 or more, you can log into the finfind website and access a registered consultant based in your region – the site will provide a list of consultants together with their profile and experience to date and you can decide who would be the most suitable one to approach. You would then email the consultant and provide a short overview of your funding requirement – the consultant would respond and indicate if they are able to assist and if so, would arrange to meet with you to engage further. The consultant would provide an overview of how they could assist together with their fees (via a written quote) and if you are happy, the process would commence.

The consultant will then take you through a 6 step decision making process viz.

- Is it finance that your business really needs?

– What is it you need finance for?

– What type of financial product is most suited to your need?

– Which financiers offer the required financial products?

– How you should approach the finance provider? and

– How you should deal with the outcome of their application

This process will culminate in the consultant providing a recommendation as to the best route to follow and the role they will play.

VA: The access to finance market across the continent is not on par with demand, any reasons FinFind has encountered?

BARRY: Because the failure rate of small businesses (particularly in the first 2-3 years of their existence) in SA is very high, the mainstream banks have become risk averse – although they provide a range of funding products, any approach by the SME owner to them to access these products, needs to be properly prepared. Financiers expect a high quality application / business plan which demonstrates an ability to repay the debt, the right jockey at the helm and a viable and sustainable business going forward. Getting the best foot forward right upfront is key to ensuring your business attracts the attention of funders.

VA: Standard Bank is clearly leading the way in unsecured loans market. How much vigilance is required in this arena, specifically for the SME owner?

BARRY: The unsecured loan market has shown significant growth over the past few years although I believe is unsustainable – Capitec & African Bank have been market leaders although the average size loan is fairly small and largely directed at the consumer market. Obtaining unsecured credit has become too easy, is very expensive and I believe should be avoided by small business owners if possible.

VA: The South African market is made up of a proportional informal, yet sustainable market share. What are your thoughts in terms of leveraging from this part of the market?

BARRY: The informal sector is a huge contributor to SA’s economy and largely operates ‘below the radar’ – their progression into the more formal sector of the economy should be encouraged and facilitated so that they can compete with larger businesses – this could entail assistance with the introduction of formal systems & procedures within their businesses together with targeted mentorship and business support.

VA: Predominantly microfinance is channelled through government financed institutions. Does FinFind see potential in Managing an investment fund for the microfinance sector?

BARRY: I don’t think so – the existing players in the market understand & dominate this sector. In addition, entering into this market in the foreseeable future would, I believe, be very high risk – over and above that, one would have to compete with 3-4 very strong and visible players

VA: Where is Finfind growing to and what is the envisaged future impact on the SME market?

BARRY: In addition to expanding into the other provinces of SA, further development of the website to engage the SME owner more directly is planned in the near future – we are keen to empower the small business owner to come forward and showcase their business and attract the attention of funders / financiers in SA.

VA: More than 80 percent of people in Africa do not have any access to formal financial services. How does FinFind see its success unfolding in this regard?

BARRY: In time, the finfind model could be adapted to cater for the needs of small businesses in other countries in Africa – a franchise or license model could be developed in this regard.

VA: Let’s end on a lighter note, tell us about yourself?

BARRY: I am a passionate supporter of SMEs in SA – having left the corporate world some 8-9 years, I can honestly say I have enjoyed every minute of it. The opportunity to assist small businesses across a wide range of industries is very rewarding as you get exposed to a diverse spread of needs and challenges. My core focus is assisting small business owners raise finance for their businesses although I like to get involved with providing other business development services as well.

Barry thanks for chatting to us.