Many established small businesses in SA are profitable but lack the financial systems and planning needed to prove to lenders, investors and commercial partners that they are ready to grow.
This is according to the Bankability Gap Report released by micro, small and medium enterprises (MSME) development specialist Fetola.
The research draws on businesses across all nine provinces and multiple sectors that were assessed between April and July 2025 through Fetola’s financial verification process.
Based on financial verification data from 177 growth-oriented businesses, the research found that 86.6% demonstrated sustainable sales and 76.8% were profitable. However, only 34.7% had credible management reports, while 13.3% could produce a 12-month budget.
Fetola describes this disconnect as the MSME "bankability gap" – the gap between running a commercially active business and being able to demonstrate that the business is financially ready to take on funding and grow.
According to Grant Prince, head of impact investing at Fetola, fintech has a role to play in addressing this gap.
“The real value of fintech isn't more data; it's data a funder can trust. When a small business's numbers are verified to a standard that investors recognise, the conversation moves from 'trust me' to 'here's the evidence'.”
Fintech is used to strengthen functionality and processes within business systems.
“The focus is on strengthening the fundamentals – from financial records and systems to cashflow management, budgeting and management information – so that businesses are better equipped to access and manage growth capital,” Prince adds.
Catherine Wijnberg, CEO of Fetola, says: “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.”
She adds: “The businesses that go on to grow sustainably are those that develop the systems, disciplines and resilience needed to build confidence long before they seek funding. If we want to improve successful outcomes for entrepreneurs, funders and development programmes alike, we need to pay as much attention to readiness as we do to access to finance.”
The research also shows why this matters. Half of the businesses assessed were experiencing cashflow pressure, despite more than three-quarters being profitable.
One of the clearest differences was financial planning. Only 13.3% of the businesses had a 12-month budget, but 90.9% of those that did were assessed as financially stable over the following six months, compared with 65.3% of businesses without one.
Investors also look at the quality and completeness of a business’s financial records – whether the information can be trusted, whether the business generates enough cash to meet its debt obligations, whether it is overly dependent on a small number of customers, and whether it has enough cash available to manage day-to-day expenses and unexpected challenges.
All of this comes back to financial readiness, suggest the Fetola executives.
Prince says the findings challenge the idea that getting more money into the MSME sector will automatically solve the problem.
“The missing middle is not simply a capital gap. It is a bankability gap,” says Prince. “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.”
According to Fetola, improving access to finance therefore needs to happen alongside practical measures that help businesses strengthen financial records, management accounts, budgeting, cashflow forecasting and internal controls.
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