Africanbank Business & Commercial Banking eyes SME market

Johannesburg - With its recent acquisition of Grindrod Bank and Sasfin, Africanbank Holdings Limited says it plans to make inroads into the unbanked and currently banked, but unsatisfied small and medium enterprise market segment. The strategic acquisitions, the bank says, were intentional to fulfil its aspirations and the business and commercial banking leg of its Excelerate25 strategy which seeks to make the organisation a fully-fledged, and diversified banking group.

The banking group’s Chief Executive for Business & Commercial Banking, Zweli Manyathi says that its vision remains one where it will provide an omni-channel experience for its clients; where clients can transact through digital platforms, while also not negating other vital channels like telephone, mobile banking as well as the physical branch where one could have that physical contact with its staff. “The bank believes that these touchpoints must remain open, and up to the client to opt for what best serves them and their interests. I am a firm believer of the fact that as we go phygital, we give the power back to the client to freely choose the channel through which they want their needs to be conveniently serviced.”  

According to McKinsey & Company, Small and Medium Enterprises (SMEs) make up about 98.5% of all businesses in South Africa and these are a critical force in the country’s economy, yet historically they have struggled to access the capital they need to grow and thrive. The consulting firm points to a 2018 survey where only 6% of SMEs reported that they received government funding, and just 9% having received funding from private sources. Formal banks have often required SMEs to at least have an existing transactional relationship with it, which is an automatic disqualification of traders whose businesses remain unbanked.

Additionally, the credit-scoring models that are employed by most banks place a heavy burden on SMEs, limiting their access to finance. Traditional risk criteria such as evidence of tax status and financial statements are typically required, and furthermore, a requirement of SMEs to put down collateral, which many of SMEs are unable to provide. As a result, a high number of trading businesses remain unbanked, let alone having access to credit.

“What we have done as Africanbank with our Fintech partner,” says Manyathi, “is to build and deliver a digital landing solution for our clients and potential clients wherein an application-to-loan-disbursal process is shortened to within 48 hours, enabling us to provide financing to entrepreneurs efficiently and conveniently. They will require little paperwork and the quicker turnaround times will ensure that we remain very relevant, responsive, and competitive, while also offering an unmatched client experience.

“We want to improve accessibility of credit for the SMEs, and obviously not negating the risks that come with this. We will be increasing our contract-financing participation and offer bridging finance for clients that need to finance their immediate operational needs. The trader market remains one where Africanbank can make a difference, and we view this as a market of those wo dare to dream.

“In line with our recent market positioning of “audacity to believe”, we believe that this is a market of those who have daring dreams of building sustainable businesses that will contribute to our economy, creating jobs in the long-run, and as such, Africanbank wants to be a part of their journey through offering them relevant and relatable banking solutions that speak to their dreams.”

Manyathi also points to the competence of the Africanbank business & commercial banking sector, and the combined skills and experience brought about by the acquisition of Grindrod and Sasfin. “I have no doubt that we have a strong and experienced team to deliver on our mandate. However, we continue to build and grow our business banking team in line with the Bank’s vision and aspirations, where we will continue to bring in new talent to reinforce our business banking solutions”.

“I also believe that we have a solid and operationally resilient risk management and compliance team with expertise drawn from our recent acquisitions and from within Africanbank. As we scale our business, we have sight of most, if not all the immediate risks that come with our business and commercial banking offering and all those risks have been factored into our return on equity,” concludes Manyathi.

The Africanbank Group recently reported an encouraging turnaround in its consolidated unaudited interim financial results for the six months ended 31 March 2024, achieving a net profit of R203 million. The Group said it had reduced its impairments of 40% through a tightening of lending criteria and a shift in its net advances mix. It recorded a 38% increase in its customer base which now stands at 5.7 million.

Group Chief Executive Officer, Kennedy G. Bungane said the results underscored the Group’s diversification and its effectiveness in driving both financial performance and customer impact, reinforcing its dedication to being a responsible financial partner. “Our primary focus is on executing our Excelerate25 strategy, emphasising growth and diversity while enhancing scale and scalability across our operations. Our aim is to accelerate the growth of the business, transitioning from a monoline micro-lender to a fully-fledged retail and commercial bank, ensuring sustainability through diversification.”