FNB has committed R200 million to the Vumela Enterprise Development Fund for deployment into new, innovative alternative SME financing solutions, aiming to benefit approximately 150 businesses, and creating over 1 000 jobs.
Significant and growing unemployment and poverty are risks to the sustainability of South Africa. A growing and sustainable SME sector does a great deal to contribute to the alleviation of these factors. The Vumela Enterprise Development Fund was established in 2009 by FNB Commercial and Edge Growth to create an innovative model to finance and support black-owned “missing-middle” SMEs, unlocking their potential for sustainable growth and subsequent job creation.
Missing-middle SMEs are those that do not fit into the traditional funding continuum provided by traditional financiers. They are too large for microfinance, don’t meet traditional credit criteria in terms of collateral and balance-sheet requirements, are too small or early stage for private equity, and don’t yet generate the exceptional returns that venture capital seeks.
Gordon Little, FNB Commercial CEO, says, “Our vision for Vumela was to build a sustainable model that would strengthen South Africa one SME at a time. By providing SMEs with contextual funding and growth support relevant to their specific size and stage of business and funding need, we can catalyse growth and provide ongoing support in the scaling journey, which is not an easy one.”
The first three Vumela portfolios
Following the initial capitalisation of Vumela FNB has committed two additional tranches of capital, each meeting a specific need in the SME sector. Vumela 1 and 2 have come to term, while Vumela 3 remains active, with R75 million in deployable capital remaining.
Heather Lowe, Head of SME Development at FNB concludes: “SMEs are the engine of job creation, transformation, and reduced wealth inequality. We are exceptionally proud of the fact that through Vumela we have been able to build a model that is demonstrably sustainable and impactful in its ability to enhance this engine. Over the past decade we have analysed and mapped the South African funding ecosystem in detail, and we are becoming more confident in the potential of Vumela to effectively address the needs we have identified. Today, Vumela plays a critical role in alternative financing that is designed in the first instance to benefit and support investees.”
