SMEs are set to benefit from a R340 million deal between Dutch entrepreneurial development bank FMO and SA fintech lender Lula.
The deal is aimed at expanding credit access for SMEs operating in a tight funding environment.
The three year, rand denominated facility will enable Lula to increase lending to SMEs that often struggle to secure finance from traditional banks.
By structuring the funding in local currency rather than dollars or euros, the deal shields borrowers from exchange rate volatility and allows capital to be deployed without passing currency risk onto small businesses.
Lula, which provides working capital, revolving credit and short-term business funding, says demand for fast and flexible finance has increased as SMEs face slower revenue growth and rising operating costs.
The lender focuses primarily on retail, logistics, professional services and light manufacturing businesses that require quick access to funding to manage cash flow or invest in growth.
Facility strengthens to serve smaller firms
Lula co-founder and chief executive officer Trevor Gosling said the facility strengthens the company’s ability to serve smaller firms that remain underserved by conventional banking models.
“Many viable SMEs are profitable but do not meet the rigid collateral or paperwork requirements of traditional lenders,” he said. “This funding allows us to extend credit responsibly while maintaining speed and flexibility.”
Access to working capital can determine whether a business survives seasonal dips or secures new contracts.
Lerato Masebe, who runs a distribution company supplying independent supermarkets in Gauteng, said she turned to fintech funding after her bank reduced her overdraft limit last year.
“We needed stock ahead of a major supply contract, but the bank process was slow and required additional security,” she said. “With alternative funding, we were able to move quickly and fulfil the order.”
Similarly, Cape Town based engineering services entrepreneur Yandiswa Jacobs said flexible credit helped her business acquire new equipment to take on municipal maintenance work.
“Traditional finance would have delayed the opportunity,” she said. “Access to faster funding meant we could scale without missing the contract window.”
Finance institutions channel capital through fintech lenders
Development finance institutions have increasingly channelled capital through fintech lenders as a way of reaching smaller enterprises more efficiently. FMO, the Netherlands’ development finance institution, invests globally in projects that support private sector growth and job creation in emerging markets.
In a statement accompanying the deal, the bank said expanding access to SME finance in South Africa is central to supporting inclusive economic growth and employment.
Industry analysts note that while traditional banks remain a dominant source of business credit, lending criteria have tightened in recent years amid economic uncertainty. Smaller firms without substantial assets or long credit histories often find it difficult to secure loans, leaving a funding gap that fintech platforms aim to fill.
The R340 million commitment is expected to be deployed over three years, supporting hundreds of small businesses across sectors. While it does not solve South Africa’s broader SME financing challenges, the facility adds liquidity to a segment of the market that remains constrained.
Navigating a fragile recovery, improved access to capital may offer breathing room to stabilise operations, invest in productivity and protect jobs for many entrepreneurs.
