New research finds most established MSMEs are generating sales and profits, but few have the financial systems needed to demonstrate they are ready to grow.
Grant Prince | image supplied
South Africa’s small business funding challenge may be less about a shortage of capital and more about whether businesses are ready to access it.
Research by MSME development specialist Fetola shows that while most established small businesses assessed were generating sales and making a profit, relatively few had the financial reporting and planning systems needed to demonstrate that they were ready for growth.
Fetola’s MSME Bankability Gap Report, based on financial verification data from 177 growth-oriented businesses, found that 86.6% had sustainable sales and 76.8% were profitable.
However, only 34.7% had credible management reports, while just 13.3% had a 12-month budget.
Fetola describes this disconnect as the MSME “bankability gap”: the difference between operating a commercially active business and being able to demonstrate to lenders, investors and commercial partners that it 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 findings also point to the role of financial planning in business stability. Half of the businesses assessed were experiencing cash-flow pressure, despite more than three-quarters being profitable.
Of the businesses that had a 12-month budget, 90.9% were assessed as financially stable over the following six months. This compared with 65.3% of businesses without such a budget.
Grant Prince, head of impact investing at Fetola, says the findings challenge the assumption that increasing the flow of capital into the MSME sector will automatically address the barriers facing small businesses.
“The Missing Middle is not simply a capital gap. It is a bankability gap,” says Prince.
Fetola says improving access to finance therefore needs to be accompanied by measures that help businesses strengthen financial records, management accounts, budgeting, cash-flow forecasting and internal controls.
The research is based on businesses across all nine provinces and multiple sectors that underwent Fetola’s Financial Verification process between April and July 2025.
