KHULA
ENTERPRISE FINANCE L TD PRESS RELEASE
01 November 2006
KHULA'S GROWTH STRATEGY ON TRACK
At a presentation to the Portfolio Committee on Trade and Industry, Khula
revealed today that its growth strategy adopted in 2004 was on track and
continues to show positive results. Total disbursements were marginally up at
R329 million over the previous year, affected in part by the transfer of a
portion of Khula's business to the newly formed South African Microfinance Apex
Fund (SAMAF). Growth in guarantees taken up was robust at 24% over the previous
year, while loan advances to intermediaries increased by 13%. In the previous
financial year, the company notably also launched the Business Partners Khula
Start-up Fund which was capitalised at R 150 million and is dedicated to the
financing of start-up and early stage businesses.
Over the last two years Khula has focused its energies on (i) re-organising its
internal operations to better serve the SME market, (ii) seeking better
strategic alignment with its channel partners and intermediaries and (Hi)
introducing new products and distribution channels. The announcement today on
progress in relation to the execution of its growth strategy is a positive indication
that the organisation is taking strides in bridging the SME financing gap and
delivering on its mandate.
"Weare determined to see the vision of a robust, relevant and effective
Khula through to fruition", says Xola Sithole, Khula's Managing Director.
"The institution is now a lot more focused and our partners are aware that
we are serious about achieving our objectives of maximising access to finance
to SMEs in a financially sustainable manner.
We recognise that a lot of work still needs to be done. Whilst it's commendable
that the financial sector is talking more and more about the provision of
finance to SMEs, huge challenges still remain, especially in respect of
start-up businesses and entrepreneurs with limited or no collateral. This is the
space that Khula will continue to occupy without "crowding out" the
private sector. We are constantly looking for partners that understand the
nuance and dynamics of this market segment and are serious about making
investments in the SME financing landscape", he says.
While Khula has grown disbursements by 60% since 2003, this growth has not been
at the expense of quality. The provision for bad debts as a percentage of the
loan book has come down from 38% in 2002 to 2% in 2006. The organisation is
also focusing on growing the proportion of income from its core business, with
interest revenue from lending operations increasing by 49% in 2006 compared to
the previous year.
"All of this has been achieved within the constraints of the wholesale
business model, which has been a feature of Khula since inception in 1996. The
model is restrictive and creates a distance between us and the entrepreneurs we
serve. It limits our ability to control our destiny which is currently in the
hands of our channel partners and intermediaries", says Xola Sithole. He
also announced that Khula is preparing a business case for presentation to its
shareholder the government to change its mandate so it can lend directly to a
select segment within the broader SME market. "I firmly believe that to
take the organisation to the next level of delivery, such a change is of utmost
necessity", Sithole said.
ENDS