Good news for South African SMEs: Growise reports strong repayments and growing confidence

With increased fuel prices, concerns about another virus spread, and our own president in deep trouble, there is a strong sense of doom that is hard to ignore.

However, today we bring you good, hopeful news Growise CapitalA small business funder that focuses on stimulating growth in South Africa's SME sector. There are 2.4 million to 3.5 million small businesses in South Africa, which account for the majority of businesses. These businesses employ up to 60 percent of the South African workforce, contributing greatly to the country's GDP.

According to Jonty Strimling, co-founder and chief risk officer of GroWise Capital, SMEs have had to work hard over the past few years, but things are looking up.

According to Strimling, repayment performance across its portfolio has improved over the past 12 months, even in the high-risk credit segment. Applications have increased and Gruywise Capital is approaching businesses with more strong credit profiles for funding.

This is partly due to reduction in interest rates, making it easier to repay loans. Additionally, consumer spending has increased and thus, applications for funding and performance in Gruywise Capital's portfolio are improving.

Groovy reports that the average amount advanced per deal has increased by 15 percent over the past six months. Average terms are longer, and overall, approval rates are increasing. Refinance customers are qualifying for larger facilities, and steady refinance approval numbers point to consistent repayment performance over time. Groovise has also seen a significant increase in return business from customers who were previously funded, took a break and have now returned with a stronger financial position.

Most interestingly, businesses in healthcare, professional services, construction, manufacturing, logistics and energy supply are increasingly turning to GroWise Capital.

“Businesses in these sectors are thinking strategically about their funding mix. Industries affected by commodity and import/export price volatility need a funder that can respond as market conditions change,” says Strimling.

“We can see through GroWise Capital data that South African business owners are resilient. Improved macroeconomic conditions, coupled with a maturing approach to alternative funding, are creating a new generation of well-capitalized, growth-focused SMEs,” he says.

This is great news for SMEs, who have struggled to keep their heads safe over the past few years. Thus, alternative funding that is not from a bank has become more popular over the years.

Just last month, Ozo and Lula teamed up to offer funding to SMEs. These services are essential for SMEs who want to grow but are struggling to secure funding through traditional channels.

Being able to access funding through a provider that understands the complexity of operations is a boon. IT also feels that businesses are thriving these days given the better repayment rates and upper limit of funding provided.

There is certainly still work to be done, but it's good to hear that the SME market is improving.