South Africa’s smallest businesses are punching above their weight when it comes to job creation – but the system is still actively working against them.
A groundbreaking new report from Finfind, backed by African Bank, exposes a stark paradox: the nation’s micro enterprises (those turning over under R1 million annually) are the undeniable drivers of MSME employment. Yet, they remain the most excluded from the very funding they need to grow.
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The 2025 SA MSME Access to Finance Report isn’t just another study. Based on over 10,000 verified funding applications and 605 finance products, it paints a damning picture: traditional funding models are completely out of sync with the urgent needs of South Africa’s high-impact micro businesses.
The Numbers Don’t Lie: Micro Businesses Lead Job Growth
Finfind’s data highlights the critical role these small players fulfil:
- 85.6% of all funding requests came from businesses earning under R1 million.
- These micro businesses are responsible for over 80% of all MSME jobs.
- Despite this, 38.7% of applicants seeking loans under R250,000 face the highest rejection rates.
- Women now own 36.1% of applicant businesses, yet female-focused funding products have plummeted by 33%.
- Black-owned MSMEs make up a staggering 83.7% of funding requests, a significant jump from 66% in 2018.
“If we’re serious about job creation, we need to support the businesses that are actually doing it,” urges Finfind CEO Darlene Menzies.
The Core Problem: Outdated Assessment Meets Real-World Needs
So, what’s the disconnect? Despite their immense impact, micro businesses are still being assessed using outdated consumer credit models. Most simply don’t have the formal accounting, payroll, or intricate financial records that traditional lenders demand.
While these determined entrepreneurs are striving to scale and innovate, the financial products supposedly designed for them are failing to meet their actual reality.
Key Trends: Where SA’s Small Businesses Are Thriving
- Gauteng remains the MSME powerhouse (37.3% activity), but other provinces are rapidly gaining ground, with notable growth in KwaZulu-Natal, Mpumalanga, and the Eastern Cape.
- High-demand sectors include manufacturing, food and hospitality, and agriculture – all crucial for economic development.
- A significant 88% of applicants operate as (Pty) Ltd companies, indicating a move towards formalisation.
The Credit Score Blind Spot: A Major Barrier
The report uncovers a critical flaw in current assessment methods:
- Over half (50.9%) of micro business owners have low credit scores – often due to personal rather than business financial history.
- Only 36.8% possess formal financial statements.
- A massive 83.4% operate without formal payroll systems.
“We have to move past rigid scoring and start using alternative data, fintech, and open finance to unlock access,” states Jaco van Jaarsveldt, Chief Strategy & Innovation Officer at Experian SA.
The Funding Mismatch: Supply vs. Demand
The report also highlights a glaring misalignment in the funding ecosystem:
- Startup capital is one of the most requested types of funding, yet it doesn’t even feature in the top 10 products offered by funders.
- Conversely, the ICT sector, representing just 5.5% of demand, boasts an astonishing 125 funding products on offer.
- Meanwhile, high-demand sectors like hospitality and retail remain critically underserved.
It’s Time for Action: What Needs to Change
The Finfind report issues an urgent call to action for funders, banks, and government:
- Ditch outdated credit models: Embrace flexible assessment criteria.
- Roll out open finance frameworks: Improve data visibility and transparency.
- Partner with fintechs: Leverage technology to reduce costs and friction for micro-loans.
- Expand credit guarantee schemes: Specifically for businesses under R1 million turnover.
- Reform Reserve Bank reporting (BA200, BA900): Enhance MSME lending transparency.
- Act on the new MSME funding policy: Implement the policy gazetted in 2024 without delay.
“Seven years on, and the same barriers remain,” Menzies laments. “We need coordinated, data-driven change – now.”
The full report is free to download at https://accesstofinancereport.co.za/, backed by African Bank, SAB Foundation, Experian, and the Department of Small Business Development.
