SME development in South Africa: Why government support keeps falling short
By Larry Claasen
THE South African receivables finance market – the practice of businesses using unpaid customer invoices to get immediate cash – has more than doubled in less than a decade.
According to FCI, the global body for factoring and financing, it rose from €22,17 billion (R364,68 billion) in 2018 to €42,62 billion (R828,88 billion) in 2025.
But as much as the receivables finance market – commonly called factoring – has grown, it could grow even larger if it were adapted to facilitate the funding needs of SMEs.
The Building a modern receivables finance ecosystem in South Africa report, published by the Centre of Excellence in Financial Services pointed out that these figures reflect traditional factoring only, typically structured around large corporate-to-corporate facilities, with little direct SME benefit.
Putting the recommendations of the report into place could be a significant and much needed boost to SMEs, said Centre of Excellence in Financial Services executive director, Mark Brits.
“Receivables finance is underutilised in South Africa, with an SME funding gap estimated at R350 billion, and by learning from the best international practices adopted in other jurisdictions, we should be able to support our economy by simplifying access to finance.”
By selling off their invoices, SMEs can quickly turn an asset into cash without incurring costs.
“In the absence of a contractually enforceable payment period, at no cost to the SME, receivables finance may be the only practical approach to resolving the cash conversion cycle for SMEs,” said Brits.
The report recommended changes to the receivables finance ecosystem like:
- Reform the legal environment to enable assignment while protecting buyer rights
- Establish a centralised, digital receivables and security-interest registry
- Enhance regulatory oversight through improved reporting and data visibility
- Support responsible growth and market conduct across all receivables finance models
- Promote a competitive, multi-product market that encourages innovation and lowers funding costs
- Strengthen supply chain resilience by improving SME liquidity
A new law
To achieve these recommendations, the report said a dedicated Receivables Finance Act aligned with international norms, like the EU Assignment of Claims Directive, the US UCC Article 9, and UNCITRAL standards should be introduced.
Such a law would explicitly enable the assignment of receivables, including public-sector invoices, while embedding proportionate protections for buyers, providing clarity on notice, priority, dispute resolution, and dilution of claims.
Changes to the BA900
Expanding the BA900, a monthly regulatory return form mandated by the South African Reserve Bank (SARB) that collects institutional and maturity breakdowns of assets and liabilities from all registered domestic banking institutions, can also boost the sector.
This type of expansion would improve visibility of SME exposures, segmentation of receivables portfolios, payment-behaviour trends, and asset-quality metrics, including disputes and invoice dilutions.
Modernisation is a must
It also said banks and financiers should adopt transparent, consistent practices, standardising cession processes, notice procedures, and dispute-management protocols in line with international norms. Digitisation and automation should be leveraged to reduce onboarding friction for SMEs and improve operational efficiency.
Corporate buy-in
Corporate buyers can also support reform by shifting from blanket anti-cession clauses – contractual clauses that prohibit a party from transferring or ceding rights without consent – to managed, conditional assignment provisions.
Such changes would be underpinned by registry verification, standard dispute notification processes and confidentiality safeguards, ensuring that both buyer and supplier interests are protected.
A digital age
The report said fintechs and technology providers underpin the digital infrastructure required for modern receivables finance. They should develop systems that are fully compatible with a national receivables registry, provide seamless digital onboarding for SMEs, and enable automated verification for financiers.
Time to work together
It said also SMEs and their representative associations should take proactive steps to strengthen internal governance and mitigate operational risk. They should conduct contract reviews to identify anti-cession clauses and implementing basic governance processes can reduce errors, prevent unintentional multiple financing, and enhance overall financial discipline.
Industry associations can also play an important role in convening stakeholders and harmonising practices across the receivables finance ecosystem. They should develop industry-wide guidelines covering assignment notices, dispute processes, documentation standards, and supplier onboarding.
A golden opportunity
The country already possesses many of the building blocks required for success: strong financial institutions, a robust legal system and sophisticated supply chains.
What is missing, however, are the modern foundations – legal clarity, centralised transparency and aligned incentives – that enable receivables finance to scale safely, efficiently and inclusively.
