Many profitable enterprises lack the financial systems and planning needed to secure funding and grow.
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South Africa’s small business sector faces a challenge that goes beyond access to capital: many profitable enterprises lack the financial systems and planning needed to secure funding and grow.
New research by MSME development specialist Fetola shows that while most small businesses are commercially active, they struggle to demonstrate financial readiness to lenders and investors.
Banking report
The MSME Bankability Gap Report, based on financial verification data from 177 growth‑oriented firms across all nine provinces, found that 86.6% had sustainable sales and 76.8% were profitable.
Yet only 34.7% produced credible management reports, and just 13.3% could present a 12‑month budget.
Catherine Wijnberg, CEO of Fetola, describes this disconnect as the “bankability gap” – the difference between running a viable business and proving it is financially prepared for growth.
“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,” said Wijnberg.
“The businesses that grow sustainably are those that develop systems, disciplines and resilience long before they seek funding.”
Cash-flow pressure
The report highlights why this matters. Half of the businesses assessed reported cash‑flow pressure despite profitability.
Financial planning emerged as a key differentiator: 90.9% of firms with a 12‑month budget were financially stable over six months, compared with 65.3% without one.
“The Missing Middle is not simply a capital gap. It is a bankability gap,” said Grant Prince, head of impact investing at Fetola.
“Many of these businesses have customers, generate revenue and make a profit. What they often lack are the systems, financial information and management disciplines that allow an investor, lender or commercial partner to assess the business with confidence.”
Access
The report concludes that improving access to finance must go hand‑in‑hand with practical support to strengthen financial records, management accounts, budgeting, cash‑flow forecasting and internal controls.
Without this, many commercially active MSMEs may remain excluded from growth opportunities despite their profitability.
