Banking giant, FNB, says despite a struggling economy, it is still committed to lend to small businesses.
“Contrary to current market dynamics of decreased lending to small businesses during times of low economic growth, FNB Business continues to lend to this important sector of the economy,” says Daniel Kaan, Business Core Banking CEO at FNB Business.
“During the first six months of its financial year, FNB Business grew its customer base by an additional 8% while lending to SMEs grew R1.4bn from R37.8bn in June 2019 to R39.2bn in December 2019 (over 6 months).
“The Bank continues to innovate, review its lending processes and policies to assist SMEs of all sizes, including start-up businesses with an annual turnover of less than R5 million. “
He said that given the growing demand of unsecured credit from start-up businesses, FNB Business introduced the ‘Business Booster Loan’ in August 2018, to further cater for SMEs who would never qualify for a bank loan.
“Since inception over R35.5 million has been extended to 683 small businesses.
“Moreover, the Bank has gone to great lengths to simplify its lending processes to ensure that SMEs can conveniently and seamlessly take up credit through any channel of their choice,” Kaan added.
“As a result, we’ve seen incredible growth in lending activities facilitated through digital channels.
“The Bank currently processes approximately R11 million in pay-outs within a few minutes through the FNB App. Since April 2019, over R110 million credit (Overdraft, Credit Card, Term Loans) was extended via the FNB App.”
He said that going forward, it is essential for us to dispel the notion that commercial banks are not keen to lend to certain segments of the SME market.
“In essence, we would like to see more credit extension to our smaller businesses with an annual turnover under R5 million, which in our view are underserved.
“What is also often overlooked is ‘customer segmentation’. Quite simply, there are thousands of variations of customer needs, determined by factors such as household/business income, industry, size and nature of a business etc.
“Customer value propositions need to talk to the nuances of the customer target segment in particular and it is often disregarded how difficult it is to solve for the almost unlimited variations of requirements. “
Kaan said that as an example in South Africa is the difference between formal and informal business segments; it is extremely challenging to service the needs of a formal, metro-based business that is fully banked versus an informal business trading mainly in cash.
“The ‘formality’ isn’t necessarily a sign of the sophistication or quality of the business, but rather just the different way in which the market it operates in is structured.
“For these reasons at FNB we refer to the informal sector as the ‘unseen sector’ and we have made significant strides towards addressing this segment of the market through various partnerships and strategies to learn how we will better serve the unique requirements of this customer target market,” he described.
“Notwithstanding some of the complex dynamics of financing the SME market, we are confident that through the better use of data and understanding client context, easier credit application via automated scoring and digitization, lower origination costs, this will lead to better and deeper credit underwriting and quicker turnaround times, thereby boosting penetration and growth.
“As competition in the banking sector intensifies, we are confident that our market share and customer base will continue to grow by constantly innovating and offering relevant market leading solutions that caters for the evolving needs of entrepreneurs. “