Khula
Enterprise Finance Ltd Maximising access to finance
Background
Khula
Enterprise Finance Ltd was established in 1996 to focus on the promotion and
development of SMEs in South Africa. The aim is to address market failures and
reduce socio-economic gaps through making access to finance easier for small
and medium enterprises (SMEs). Khula's core function is to promote sustainable
access to finance for SMEs through an effective network of retail financial
intermediaries, and commercial banks. In the near future Khula will extend its
outreach and impact by introducing new delivery channels such as using SEDA
regional offices as access points and partnering with corporate as well as the
public sectors.
Target Market
Khula targets primarily Black-owned owner-managed formal SMEs. We provide
start-up and development or expansion capital. At least 60% of loan facilities
have been channelled in the following underserved provinces: Free State,
Eastern Cape, Northwest, Mpumalanga, Northern Cape and Limpopo. The balance of
the facilities is in KwaZulu-Natal, Gauteng and the Western Cape.
Our loan sizes range between R 10K - R250K benefiting a total of 66% of our
target market with the balance allocated to the bigger size loans which range
from R250K R3 million.
Khula's Strategic Direction
Our strategic objectives are to maximise access to finance and development
impact, increase awareness of Khula and its products in the target market,
invest in the development of our people to build high performance teams as well
as build an efficient, effective, financially viable institution.
Khula offers the following products to the entrepreneur:
·
Khula Credit Indemnity Scheme
·
Khula Land Reform Empowerment Facility
·
Khula Mentorship Programme
·
The non-bank: Retail Financial Intermediaries
·
Khula Joint Ventures
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Business Partners-Khula Start-up Fund
−
Anglo-Khula Mining Fund
−
Khula-Shoprite Checkers Joint Venture
−
Enablis-Khula Loan Fund
Khula
Credit Indemnity Scheme: The purpose of the Indemnity Scheme is to share the financing risk with
banks thus enabling SMEs to access funding from a participating bank or other
financial institution. The scheme enables entrepreneurs to access funding for
purposes of establishing, expanding or buying out an existing business,
business assets and working capital. Finance has to be approved by the
financial institution and the latter will only apply to Khula for a guarantee
where there is inadequate collateral.
Khula Land Reform Empowerment Facility: The Land Reform Empowerment
Facility is funded by the Department of Land Affairs (DLA) and the European
Union (EU). The aim is to facilitate land transfer and economic participation by
black people in economically viable land based agricultural enterprises (both
primary and secondary) and eco-tourism sectors.
Khula Mentorship Programme: The primary aim of the Mentorship Programme
is to facilitate of access to finance for SMEs. It offers two services, namely;
pre-loan and post loan mentorship services. During the pre-loan stage
entrepreneurs are assisted by experienced mentors with advice, counseling and
the development of viable business plans in order to access funding. In the
post-loan stage clients are assisted with various aspects of managing a
successful business as identified by the client, mentor, bank and Khula.
Non-bank Retail Financial Intermediaries: Retail Financial
Intermediaries, commonly referred to as RFls, are independent organisations or
companies accredited by Khula to lend money directly to SMEs. Once accredited,
RFls receive loan funds from Khula to disburse to small and medium enterprises
according to their own lending policies. RFls have to ensure that loans disbursed
are paid back by the SMEs in order to pay back the loan originally received
from Khula.
Joint Ventures
The Business Partners-Khula Start-up Fund is a fund created to enable
entrepreneurs to establish new enterprises as well as early phase business expansion.
Both Khula and Business Partners have co-invested in the venture, and the fund
is managed by the latter.
The Anglo-Khula Mining Fund is a joint venture between Anglo American
and Khula Enterprise Finance which facilitates entry of junior but commercially
viable mining ventures into the mainstream mining sector. The fund provides
seed capital to assist junior mining projects at pre-feasibility and pre
commissioning stages.
The Khula-Shoprite Checkers Joint Venture aims to create positive
spin-of its for BEE in South Africa by granting successful SME applicants OK
Foods franchise concessions on negotiable terms. OK Franchise and Khula provide
dual guidance in terms of outfitting, training and mentoring the SMEs to
deliver maximum viability for their new businesses.
The Enablis-Khula Loan Fund is a partnership between Enablis
Entrepreneurial Network, Khula Enterprise Finance Limited and FNB Enterprise
Solutions. The fund provides 90% guarantees for loans extended to ICT focused
and enabled businesses. Enablis is a non-profit private-public partnership
sponsored by Hewlett-Packard, Accenture, Telesystem and the Government of
Canada. FNB Enterprise Solutions, a subsidiary of First National Bank Limited,
is FNB's specialist Small and Medium Enterprises financing division.