Small Enterprise Development Finance Agency (SEDFA) Microfinance Channel Model; with Deputy Minister

Video The Department of Small Business Development (DBSD), the Small Enterprise Development Finance Agency (SEDFA), and Microfinance Institutions (MFIs) briefed the Portfolio Committee on Small Business Development on SEDFA’s funding model, the role of intermediary partners, and related oversight concerns. The session also included deliberations on challenges affecting microfinance institutions and the sustainability of small enterprises. SEDFA provided an overview of its strategy, mandate, value proposition, funding channels, and rationale for using Intermediary Channel Partners (ICPs). The presentation also addressed the impact of MFIs since 2020, the regulatory environment, cost structures, challenges in microfinance, and proposed improvements. Plans included capitalisation from both public and private sources, equity acquisitions, new products and funding models. Members raised questions regarding the viability of the intermediary model asking how the Department planned to ensure this changed and businesses continued to thrive and create jobs; the rationale behind approving new and inexperienced intermediaries, citing an example of one the intermediaries which was approved within a month of being registered, questioning how this intermediary was approved and how much was disbursed to it; she also asked how most of it became non-profit organisations, what the rationale behind this was; the lack of adequate mentoring and support for funded businesses; queried the implementation of technology solutions, job sustainability, and the real developmental value of the supported enterprises. Committee Members questioned financial mismanagement related to intermediaries, inadequate due diligence, the liquidation of some partners, the nature of non-profit organisations (NPOs) involved in financing, and whether due diligence was sufficiently rigorous. Questions were also posed about specific intermediaries like Phakamani and Nala Finance regarding funding amounts, trading history, and outreach. The Committee made a resolution to schedule a separate engagement with the MFIs, saying intermediaries had to come ready with detailed responses.