Lessons from India and Brazil: How South Africa can boost support to small businesses? - PowerPoint PPT Presentation

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Lessons from India and Brazil: How South Africa can boost support to small businesses?

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  1. TIPS’ study: Stephen Timm Lessons from India and Brazil:How South Africa can boost support to small businesses?

  2. Finance schemes • Guarantee scheme lending: Khula vs CGTMSE (India) • Supply chain financing: Cartão BNDES (Brazil)

  3. Khula guarantee scheme • Set up in 1996 • Highest number of loads: 797 loans in 2002 • Number of loans evolved from 545 (2007) • but down to 53 (2010) • Problem areas: • Red tape; • Defaults keep banks away • Vs. Khula blames banks for low numbers • Banks warn Khula Direct = ‘disaster’

  4. CGTMSE vs Khula

  5. Lessons for Khula • Lesson 1:Targeted lending • Lesson 2:Strong IT system • Lesson 3:Meet with banks • Lesson4: Improve claims process • Lesson 5:Sharpen applications

  6. Cãrtao BNDES: Problem • Problem 1: SME struggle to access finance to buy raw materials, services • Problem 2: Suppliers don’t trust SME to buying goods on credit • Problem 3: Import-fronting rife

  7. Cãrtao BNDES: What it is? • Credit card with e-commerce • Finance from R$1.2m to R$2.46bn • Local inputs rule: 60% • Reach: • 303 000 buyers • 23 000 suppliers • 135 000 goods and services

  8. Cãrtao BNDES Banks use it: • Lei Geral’s Article 58 • Card fosters client loyalty • Attracts suppliers to bank • Four of five banks are state-owned • Buyers can approach supplier directly – supplier puts transaction through

  9. Cãrtao BNDES: Advantages • BNDES screens suppliers, buyers • Encourages local content • Cuts down red tape • Gets banks to lend via government (though BNDES is very large and very unusual) • Uses internet as platform • Suppliers from existing BNDES fund

  10. Cãrtao BNDES: DTI says • Useful for working capital, overheads • Problem 1: Many micro businesses unbanked, in rural areas, low literacy • Problem 2: Challenge to get banks to enter as risks would be high • Zikode: ‘Need for PPP’

  11. Summary • State must partner more with private sector, banks to reach small businesses through innovative methods • Simplify structure of financing – Khula, NEF, DFIs fall under IDC

  12. Contact Details Stephen Timm 021 685 7915 083 330 4013 stephentimm@telkomsa.net