Small and Medium Enterprises (SMEs) cannot grow without access to funding, and South Africa needs its SMEs to grow. What needs to change in the middle?
The frame for South Africa’s economic growth in 2026 is one of modest recovery. The National Treasury’s 2026 Budget Review projects real Gross Domestic Product (GDP) growth of around 1.6%. The World Bank echoes these figures, at 1.4%, and expects growth to increase to 1.5% by 2027.
While the government has promised that the country sits on the ‘cusp of rapid growth’, unemployment rose to 32.7% in 2026. The number of unemployed South Africans now stands at 8.1 million. The income per capita also remains below the 2007 levels. The outlook sounds bleak. However, one sector has the potential to change the narrative – the SME.
South Africa’s 2.5 million SMEs contribute more than 40% of GDP. They also employ approximately 60% of the workforce. The sector has the potential to light the proverbial fire under economic conditions. However, it is not gaining access to the funding it needs. Simply put, SMEs need finance if they are to unlock this potential.
A structural funding gap is limiting growth
The funding gap is estimated to sit between R350 billion and R386 billion. This is despite the fact that the country has an advanced financial system and high levels of private sector credit. For the SME, this gap creates a simple reality. Money exists within the system. However, most businesses cannot access it on the terms or within the timelines they need.
This is not a story about failing businesses. Nor is it about a financial sector that is systematically underserving SMEs. Instead, it reflects a structural mismatch that is costing South Africa jobs, tax revenue and economic momentum. The traditional lending model is holding back both the financial institutions that SMEs approach for funding and the SMEs themselves.
Many lenders still use consumer-grade scoring models for business loans. They also operate within outdated systems that misread the realities of small businesses. As a result, cautious lending policies, stringent collateral requirements and the perceived risks associated with SME lending continue to hold the sector back.
At the sub-R2 million loan level, where most SME funding needs exist, traditional credit assessment, relationship management and compliance costs make it structurally difficult for conventional lenders to serve this market profitably. This is another reason why SMEs need finance through more suitable funding models.
Partnerships and technology can unlock SME finance
Resolving this challenge comes down to partnerships and technology. Banks can industrialise SME underwriting by combining point-of-sale, accounting and payments data with sector-specific scorecards. This approach can automate smaller-ticket lending decisions. In addition, banks can partner with fintechs to extend their reach into SMME business segments. As a result, they can better serve SME financial needs within realistic funding frameworks.
This is not an SME problem that blames audits, cash flow or collateral as unmet requirements. Instead, it is a South African problem. It requires government and financial institutions to invest more effectively in the SME because it remains the country’s most 
viable engine of job creation. Starving SMEs of working capital is a national economic challenge. Fortunately, existing models can solve it.
South Africa cannot grow at the pace it needs if the businesses most capable of creating jobs remain locked out of finance. Closing the SME funding gap is not about making lenders more charitable. Instead, it is about making lending models more intelligent. SMEs need finance that reflects how they operate and grow. The institutions that solve this challenge will not only unlock growth for SMEs, but they will also help unlock growth for the country itself.
Daniel Goldberg | CEO | Co-Founder | Bridgement | mail me |
