ABSA and the government have allocated at least R500 million to a new fund to assist small, medium and micro enterprises (SMMEs). This fund will specifically cater for budding entrepreneurs who, among other things, are unable to come up with security for loan finance.
Each province has been allocated a minimum of R50 million, with both parties contributing half of the capital to the fund.
Yesterday Shan Moodley, Absa's regional manager for SMME specialist sales, officially launched the fund in KwaZulu-Natal. The launch was conducted in partnership with the Department of Economic Development and Tourism.
Moodley, speaking at the business breakfast to launch the eThekwini SMME fair for 2010, said the fund was going to cater for the needs of contractor finance such as bridging finance.
"This is for people who can't access the money through normal banking for various reasons because maybe they have no capital, poor credit history and those who have no credit history because they have never opened an account," said Moodley.
"These are people who don't have security. For example, at Khula you need to have 10 percent security and at other normal credit providers, the security they require differs."
In KwaZulu-Natal, the agreement with the government was signed last year.
The programme has been rolled out since the beginning of the year before it was officially launched yesterday.
The entrepreneurs will be able to access the money through loans and overdrafts.
The loans will vary from R10 000 to a maximum of R1 million and are repayable over three years at a prime-related interest rate.
As part of the qualifying criteria, business owners must have skills and experience for the field they want to enter, they must have a well-researched business plan, demonstrate profitability and should have no other business interests.
Absa must be the main banker and it will target historically disadvantaged individuals and entities that are 100 percent black owned.
"We want to take informal business into formal business," said Moodley.
The bank has been one of the eThekwini SMME fair sponsors for 10 years and it has other SMME funding initiatives and a support desk in place.
The government has previously decried the fact that even though traditional banks have funding for SMMEs, the lending criteria remained too strict and were not conducive to up and coming businesses owners.
Estimates from the Department of Trade and Industry say small businesses employ 55 percent of the country's labour force, contribute 42 percent of the total wage bill and account for 35 percent of gross domestic product.
Economic Development Minister Ebrahim Patel's spokeswoman Zubeida Jaffer said it had "consistently placed on record its concern that small business people often have great difficulty in securing financial support from the banks. We welcome any initiative to support this sector."
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