Banks' lending in South Africa to large corporate companies over the last five years grew at almost double the pace of that to SMEs, reveal Reserve Bank figures.
While lending to corporates expanded by 60% in the last five years (between November 2012 to November 2017), loans to SMEs grew at a slower 39%, but still faster than the overall expansion in credit of 32% over the same period (see Graphic 1, below), figures drawn from the Reserve Bank by Small Business Insight show.
The figures are from the Reserve Bank's Bank Supervision department BA200 forms (see them here).
Those for SME lending include two categories – namely: SME Retail lending (retail loans of up to R7.5 million - or $600,000 for businesses) and SME corporate (loans to firms with an annual turnover of up to R400m - $33m).
The latest report follows a 2016 Financial Mail story which revealed that banks' credit exposure to small businesses had remained almost flat since the 2008 recession, while increasing for large businesses (see this post).
The financial sector code compels banks to invest billions of rands for various targeted investments, including black farmers, black SMEs, transformational infrastructure and affordable housing. This should therefore be driving far more lending to small businesses.
Will new code driving SME lending?
Yet increased credit does not necessarily mean more black SMEs are getting funding. While Nedbank’s loans to black SMEs increased from R1.5bn in 2012 to R4.5bn last year, the number of firms financed fell from 4,300 to 2,500.
The new amended financial sector code was gazeted by Trade & Industry Minister Rob Davies in December last year.
Banks must lend a further R32bn collectively to finance equity deals for big investors to buy stakes in large companies (B-BBEE transaction financing) as well as for black business growth and SME funding.
It remains to be seen whether the new, higher targets will drive up the increase in bank lending to small businesses, in line with the recent increase in credit to large companies.
To do so, the Reserve Bank should look at regularly publishing easily accessible figures -on both overall bank lending to SMEs in general and that to black SMEs in particular.
This may go some way to clearing up whether indeed banks are (as they claim) doing enough to fund small businesses and black-owned small firms - or not.
Timm is a South African who writes on small business. Follow Small Business Insight on Twitter at @Smallbinsight.
Stephen Timm is a