South Africa’s small business funding problem may not be only about a shortage of money, according to new research from Fetola, which shows that many established small businesses are already selling and making a profit, but still lack the financial systems and planning needed to convince lenders, investors, and commercial partners that they are ready for growth.
Fetola’s MSME Bankability Gap Report – based on financial verification data from 177 growth-oriented businesses – found that 86,6% demonstrated sustainable sales and 76,8% were profitable.
Yet only 34,7% had credible management reports, while just 13,3% could produce a 12-month budget.
Fetola describes this disconnect as the MSME “Bankability Gap” – the gap between running a commercially active business and being able to demonstrate that the business is financially ready to take on funding and grow.
“For too long, the ecosystem has viewed MSME growth primarily as a funding challenge. Yet our experience over more than 20 years suggests that capital is rarely the only constraint,” says Catherine Wijnberg, CEO of Fetola. “The businesses that go on to grow sustainably are those that develop the systems, disciplines and resilience needed to build confidence long before they seek funding. If we want to improve successful outcomes for entrepreneurs, funders and development programmes alike, we need to pay as much attention to readiness as we do for access to finance.”
The research also shows why this matters. Half of the businesses assessed were experiencing cash-flow pressure, despite more than three-quarters being profitable.
One of the clearest differences was financial planning. Only 13,3% of the businesses had a 12-month budget, but 90,9% of those that did were assessed as financially stable over the following six months, compared with 65,3% of businesses without one.
Grant Prince, head of Impact Investing at Fetola, says the findings challenge the idea that getting more money into the MSME sector will automatically solve the problem.
“The ‘Missing Middle’ is not simply a capital gap – it is a bankability gap,” says Prince. “Many of these businesses have customers, generate revenue, and make a profit. What they often lack are the systems, financial information, and management disciplines that allow an investor, lender or commercial partner to assess the business with confidence.”
Fetola says improving access to finance therefore needs to happen alongside practical measures that help businesses strengthen financial records, management accounts, budgeting, cash-flow forecasting, and internal controls.
The research draws on businesses across all nine provinces and multiple sectors, assessed between April and July 2025 through Fetola’s Financial Verification process.
The full Fetola MSME Bankability Gap Report and Executive Summary can be downloaded here.