South Africa’s micro, small and medium enterprises (MSMEs) face an estimated R350 billion financing shortfall, but experts say the problem is as much about missing, scattered and unreadable data as it is about the amount of money available.
More lenders but the same gap
According to the Organisation for Economic Co-operation and Development (OECD), the number of small-business funders in South Africa rose from 148 in 2018 to more than 300 in 2025. Yet the OECD’s Financing SMEs and Entrepreneurs 2026 report estimates an MSME funding gap of R350 billion. The apparent contradiction highlights what industry figures describe as a technology and data problem: lenders struggle to assess risk because many small businesses do not present usable financial data.
Edna Sathekga-Montse, Group Chief Transformation and Sustainability Officer at African Bank, said that understanding a borrower is central to responsible lending.
“When we understand them better, it allows us to assess their affordability and assess their credit status a lot better and a lot differently,”she told TechCabal during the Global Entrepreneurship Congress Africa in Cape Town.
Why data matters
Bank credit assessment relies on verifiable, structured evidence of revenue, expenses and repayment capacity. For many MSMEs that evidence is dispersed across invoices, bank transactions, payroll records, tax filings, accounting software and purchase orders. If these signals are not captured in ways that lenders can verify and analyse, they do not translate into a stronger credit profile.
The OECD report found that 56% of South African MSMEs are unregistered, and only 7% used a formal financial-services provider business loan to start their business. The report also notes that the sector employs about 80% of the country’s workforce, underscoring why closing the funding gap matters for jobs and economic stability.
How lenders are responding
Sathekga-Montse said African Bank is moving beyond the traditional binary loan-approval model to gather and interpret a wider set of signals before deciding on credit. She emphasised that without required data lenders cannot determine whether risk fits within their risk appetite.
- More lenders alone have not closed the gap: funder numbers doubled but the shortfall remains.
- Informal or unregistered status prevents many MSMEs from producing the verifiable documentation banks need.
- Fragmented business records — invoices, payroll, accounting systems — impede automated risk evaluation.
For a small-business owner, the practical implication is that having customers and revenue is not enough; those transactions must be recorded and presented in formats lenders can validate. Where internal bookkeeping is informal or split across platforms, the business may appear higher risk than it actually is.
Implications for policy and tech
The OECD data and industry comments point to several policy and technology priorities. First, increasing business registration and formalisation could help more firms generate the documentation lenders require. Second, interoperability between accounting software, payment platforms and bank systems would let revenue flows be verified without onerous manual processes. Third, alternative data models — combining transaction feeds, cash-flow analytics and verified digital invoices — could expand credit to firms that traditional models exclude.
Those shifts will require coordination between government, financial institutions and technology providers. Any solution also needs to protect small-business owners’ privacy and ensure data is accurate and tamper-resistant so that lenders can rely on it for credit decisions.
The stakes are high: with the MSME sector employing such a large share of the workforce, improving access to finance could support jobs and economic resilience. But as lenders and the OECD make clear, simply adding more capital to the market will not solve the problem unless it comes with better data practices and systems that make small businesses readable to credit underwriters.
