With high unemployment remaining one of South Africa’s most urgent challenges, the role of Micro, Small and Medium Enterprises (MSMEs) in scaling job creation and stimulating inclusive economic growth has never been more critical.
Yet, as Finfind’s SA MSME Access to Finance Report 2025 report released in partnership with African Bank, reveals, MSMEs – particularly formal micro enterprises – continue to face significant barriers to accessing the finance they need to grow.
“The data paints a clear picture,” says Darlene Menzies, CEO of Finfind. “Formal micro enterprises with turnovers of less than R1-million a year are responsible for over 80% of the jobs created by MSMEs and make up more than 85% of the funding need, yet they are the most underserved by funders. If we are serious about job creation, we must invest all our efforts in supporting the businesses that are creating the jobs.”
Zweli Manyathi, CEO: business and commercial banking at African Bank, comments: “African Bank’s vision is to be a bank for the people, by the people, serving the people – and that means understanding where our economic engine is most alive. This report provides a powerful lens into the needs of South Africa’s MSME sector, which we believe is key to building a more inclusive economy.
“Our partnership with Finfind aligns strongly with our Excelerate strategy, which places transformation, sustainability and empowerment at the centre of everything we do. We intend to use these insights to build better, more accessible solutions for real entrepreneurs doing real work in communities across the country.
“Far too many viable micro and small businesses are locked out of the formal financial system – not because they lack potential, but because they don’t fit traditional funding models. This partnership with Finfind is our way of stepping up to listen, to learn and to lead with solutions that reflect the lived realities of MSMEs. We will use this intelligence to co-create more effective funding products, strengthen enterprise development efforts and deepen our contribution to meaningful economic participation.”
Drawing on a large study sample of over 10 000 cleaned MSME funding requests submitted between 1 September 2023 and 31 August 2024, as well as a comprehensive funder base of 315 funders and 605 active finance products, the report is the most robust picture yet of the MSME funding environment in South Africa. The study sample has been independently deemed a credible, representative sample when compared to the SARS 2024 VAT and company tax statistics and the QLFS and Stats SA samples for the same period, and as such the findings can be generalised for the formal MSME sector in South Africa.
The businesses applying for finance are as follows:
- 85,6% of applicants are businesses with turnovers under R1-million.
- More than 60% of applications come from South Africa’s key economic hubs: Gauteng, KwaZulu-Natal and the Western Cape.
- Gauteng maintains its position as the dominant business location, although there has been a decline from 44% in 2018 to 37,3% in 2025. The Western Cape has seen a decrease of 4,3%.
- Several provinces have seen growth since 2018, with Mpumalanga increasing by 3,9%, KwaZulu-Natal by 3,3%, Eastern Cape by 2,2% and Northern Cape by 1,3%.
- Manufacturing, accommodation and food services, agriculture, forestry & fishing collectively comprise nearly 60% of all funding requests.
- The most common business registration type is (Pty) Ltd, representing 88% of applicants.
“South Africa’s MSMEs with annual turnovers below R1 million are caught in a systematic blind spot. Classified as individual consumers under the National Credit Act, they are assessed using credit risk models that fail to reflect their business realities,” says Jaco van Jaarsveldt, chief strategy and innovation officer at Experian South Africa. “This misalignment results in a lack of funding, compounded by fragmented business data regulation.
“Experian South Africa’s Financial Affluence Segmentation (FAS) model highlights a stark divide – affluent segments secure funding more easily, while less affluent MSMEs remain underserved. To bridge this gap, we need tailored financial solutions and broader open finance to enable secure data sharing and support alternative credit scoring models.
“Our partnership with Finfind, helps us leverage data and technology to build inclusive financial solutions that empower MSMEs.”
Demographics and ownership
- Black-owned MSMEs now account for 83.7% of funding requests – up from 66% in 2018.
- Gender distribution has shifted with female ownership increasing from 32% in 2018 to 36.1% in 2025. In contrast, female-targeted funding products decreased by 33% from 18 products in 2018 to 12 products in 2025.
- Gender disparities intensify with business size: female ownership drops to just 23.6% in businesses turning over more than R10-million.
- 73% of MSME shareholders are black, but this declines sharply with business size, from 76% in enterprises under R1 million to just 39% in those above R10-million.
- 50,9% of business owners in enterprises under R1-million have poor or below average credit scores, business owners credit scores improve as the business size increases.
Funding needs
- 38,7% of all businesses are looking for loans of less than R250 000, with 30,8% requesting loans between R250 000 and R1-million.
- Buying equipment (21%), business expansion (16,1%) and finance for startups (13%) are the three most requested types of funding, accounting over 50% of all loan applications
- Cash flow assistance is one of the top two funding requests for businesses with a turnover of more than R1-million per annum.
- The demand for purchase order funding increases as the business size increases, with 4,8% in businesses with a turnover of less than R1-million per annum to 10,2% in businesses with a turnover of more than R10-million per annum.
Funding supply and demand
The demand has remained consistent since 2018, with finance for equipment purchases, expansion funding and startup finance remaining the top three funding needs.
Funders have been slow to respond:
- Finance for startups and micro businesses is in high demand. Startup finance is absent from the top 10 finance product offerings by funders.
- The ICT sector is oversupplied with finance products (125 offerings), despite demand accounting for just 5,5% of MSME funding requests.
- In contrast, the accommodation and food services sector, which ranks second in demand, remains significantly underserved.
Finance recordkeeping and funding readiness
- Only 30,9% of applicants are able to provide a list of outstanding debtors, and just 36.8% have formal financial statements, with less than half being able to produce latest management accounts, highlighting a persistent lack of funding readiness across the sector.
- Only 24,6% of businesses utilise formal accounting systems, and 83,4% function without payroll systems, despite 71,6% of these employing three or more people.
Calling for change
The SA MSME Access to Finance Report 2025 not only highlights challenges, but it also points the way forward. It suggest the following:
- Intentional focus on funding solutions for MSMEs with a turnover of less than R1-million per annum.
- Reforms to traditional risk assessment and credit scoring models used by banks and DFIs (Development Finance Institutions).
- Open finance and alternative data – a shift from the current data holder-centric approach to a data subject-centred approach to improve data sharing to revolutionise MSME credit risk assessments and scoring.
- Banks and DFIs to partner with fintechs to harness digital solutions for loan processing to reduce the costs of smaller loans.
- Improved risk sharing models including the revamping of Government’s credit guarantee scheme with a focus on supporting funding for MSMEs with turnovers of less than R1-million.
- Enhanced MSME support services, including financial recordkeeping training and accounting tools, funding readiness assistance, and digital enablement.
- Changes needed to banking sector submissions (BA200 and BA900) to the Reserve Bank for their reporting on lending to MSMEs to provide greater granulation and transparency, aligned with OECD standards.
- Changes recommended to the NCA are detailed in the report.
- Implementation of the recommendations in the newly gazetted MSME funding policy.
“Seven years after the first report, the same challenges persist,” Menzies adds. “It is vital that we respond to what the data is telling us and shape appropriate solutions to meet the demand. The newly gazetted MSME funding policy contains good proposals, we need to ensure they are actioned – it’s time for funders, business development agencies and policy makers to take coordinated action to implement them in order to close the R350-billion funding gap.”