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Standard Bank Africa is piloting a quick loan project for small business loans of average size R50 000 (South African Rand). Normally if you apply for a small business loan of this size banks are reluctant to look at the application. Why? Because they think it’s too small, when they do their calculations to determine what it will cost them to check out your business before they can process the application (called a due diligence), they find that the cost is higher than the profit they will make if they give you the loan. In business lingo, they say it’s not viable. (This is also called a cost – benefit assessment).

The SME Quick Loan uses a psychometric profile of the applicant to assess their willingness to repay the loan. Providing access to small business finance has traditionally been challenging in African markets due to the lack of financial statements, credit history, lack of credit bureau data and collateral among small businesses. This tool, developed at Harvard University, is believed to accurately measure the loan applicant’s knowledge of his business, intelligence, entrepreneurial drive, honesty and willingness to repay loans.

My opinion is that this would help a lot in speeding loan applications. A loan application usually requires a bankable business plan and the business plan has to provide historical and projected financial statements. It must also provide options for securing the required loan. These requirements are steep for emerging micro and small businesses that I work with and a tool like this that replaces the need for financial statements and collateral is very welcome.

The tool is aimed at helping micro and small businesses largely in the informal sector  to quickly get loans. The turnaround time for a loan application is 3 days. This sounds unbelievable for some of us who have to wait anything up to 6 months for loan approvals. Infact, in most instances, by the time the bank pays out, the window of opportunity will have long disappeared. I can only hope this product is brought to market soon.

The pilot project was successful in Kenya and Nigeria, the equivalent of R290 million was disbursed in TOTALLY UNSECURED small loans to 5 300 small businesses.

If you are in the continent, talk to your Relationship Manager at your local branch of  Standard Bank Africa.

Big up to Standard Bank Africa, well done.

The bad news is that Standard Bank South Africa still has to make the decision to use the tool in South Africa.

Big up in advance to Standard Bank South Africa, we trust you to take care of our interests.

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Till then


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