The Bottom Line
SME funding in South Africa: How Capitec and GoTyme are reshaping business finance
Two South African banks are using POS data and collateral-free working capital to give small businesses faster access to finance — but the model carries its own risks.
By Larry Claasen
THERE is a silent revolution when it comes to business finance in South Africa.
Local entrepreneurs have long complained that the country’s banks pay lip service when it comes to supporting them. They apply for funding, but more often than not get rejected because they don’t have the collateral to bank the loan.
To be fair to the banks, issuing loans to emerging businesses is high risk, so it would be irresponsible of them to fund them without some safeguards, as it would put their depositors funds at risk.
So to offset this risk, they charge a high interest rate and set in place strict lending requirements.
But this approach exacerbates the SME funding problem because it makes funding expensive and hard to access.
A new funding model: Cashflow, not collateral
Two banks, GoTyme Bank and Capitec, however, are introducing a new funding model. Instead of granting a loan on the collateral inside a business, they are basing it on how much cash it generates.
Capitec, for example, uses data generated from the Point of Sale (POS) devices it sells to its customers to monitor how much cash they generate. It uses this information to do a credit assessment to determine the size of the loan it can grant them.
This formula is paying off for Capitec. Its business clients more than doubled from 244,000 to 545,000 year-on-year in the six months to the end of August 2026. Its number of merchants using its POS devices has risen from 32,000 two years ago to 141,000 this year.
And total turnover through its POS devices rose from R27,1 billion two years ago to R61,8 billion this year.
This saw its lending books grow by 37% to R35,5 billion in the period, and the part of this book that lends to very small businesses rose by 175% to R4,2 billion.
GoTyme: Collateral-free working capital
For its part, GoTyme’s working capital offering, which does not require collateral, has seen it grant R17 billion in working capital loans to 90,000 businesses to date.
Clearly, GoTyme Bank and Capitec are developing SME funding products that are meeting the moment. Entrepreneurs need funding models that are not onerous to access much needed liquidity quickly, and these funders have developed products that cater for their needs.
The risks of cashflow lending
It should be noted that basing loans on cashflow is not risk free. It requires the lenders to have sophisticated automated credit scoring systems, which can expose them to loan defaults if they get it wrong.
Then there is also the performance of the broader economy. If it starts to take strain, cash generation will be affected, putting pressure on their clients to pay them back. With no collateral, the lenders will have few options to get their money back if clients go under.
Why this matters for SA entrepreneurs
Even so, the growth in cashflow based lending should be welcomed, as it provides a funding source at a difficult time for up and coming ventures. They are generally still trying to figure out what makes them tick and at the same time need liquidity to cover their expenses.
GoTyme business group executive, Miguel Da Silva noted that while his group took pride in helping to grow businesses, it was also happy to provide them with the liquidity just to pay the rent until their invoices were paid.
The bottom line is that the country’s entrepreneurs need all the support they can get and the introduction of cashflow based lending products are probably some of the most useful provided by the financial services sector in a long time.
