IFC and FirstRand Bank to boost access to finance for SMEs in South Africa

To make loans more accessible and affordable for small and medium enterprises (SMEs), IFC has set up a risk-sharing facility with FirstRand Bank Limited that will cover half of the credit risk for a portfolio of up to ZAR1.8bn (US$99m equivalent) of loans to these businesses in South Africa.

The bank will be able to expand lending to more SMEs, including businesses owned by women and those engaged in climate-related activities, such as climate-smart agriculture initiatives.

The facility is part of IFC’s Small Loan Guarantee Program European Commission/Private Sector Window, which supports efforts to de-risk and scale up financing for SMEs in eligible countries. The program benefits from a pooled first-loss guarantee provided by the EC via European Fund for Sustainable Development and the IDA IFC-MIGA Private Sector Window’s Blended Finance Facility.

“SMEs are significant contributors to economic development, job creation and community upliftment. Therefore, FirstRand is pleased to be able to partner with the IFC on this risk sharing facility which will enable its commercial banking business, FNB, to scale its lending to its SME customers,” said Bhulesh Singh, FirstRand Group Treasurer.

Cláudia Conceição, IFC’s regional director for Southern Africa, said, “Our partnership with FirstRand Bank will unlock greater access to affordable, long-term financing in local currency for SMEs in South Africa, which currently remains limited. By catalysing more sustainable finance and demonstrating the power of partnership, we hope to inspire other financial institutions to replicate this model, accelerating sustainable growth across the country.”

This investment will benefit from a performance-based incentive grant, under the IFC and the German Government’s Federal Ministry for Economic Affairs and Climate Action (BMWK) Partnership, subject to FirstRand reaching a stretch target of 35 per cent of the RSF portfolio targeting climate finance to SMEs.

This partnership aligns with IFC’s strategy to increase private sector participation in key sectors in South Africa for inclusive, sustainable, and broad-based growth, including bridging the financing gap for SMEs. South Africa is IFC’s largest country exposure in Africa, with a current investment portfolio of US$3.74bn and an advisory portfolio worth US$7.6m

About IFC
IFC — a member of the World Bank Group — is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2024, IFC committed a record US$56bn to private companies and financial institutions in developing countries, leveraging private sector solutions and mobilising private capital to create a world free of poverty on a liveable planet.

About FirstRand Bank Limited
FirstRand Bank Limited (FRB or the bank) is a wholly owned subsidiary of FirstRand Limited (FirstRand or the group), which is listed on the Johannesburg Stock Exchange (JSE) and Namibian Stock Exchange (NSX). The bank provides a comprehensive range of retail, commercial, corporate and investment banking services in South Africa and offers niche products in certain international markets. The bank has three major divisions which are separately branded: First National Bank (FNB), WesBank and Rand Merchant Bank (RMB).

About the European Fund for Sustainable Development
The EFSD is part of the EU’s investment framework for external action, and it offers financial guarantees that allow private investors to finance projects in more challenging markets, by assuming the risks of more unstable environments while avoiding market distortions. Because the EFSD covers a share of the risks, the EU’s development finance partners such as IFC can match the EFSD guarantees with their own resources, which in turn will attract additional investors. EFSD is supporting the Program with a pooled first loss guarantee of €58m. The Program provides SMEs with access to financial services as well as risk-sharing support to encourage financial institutions in partner countries to expand their SME lending portfolio, with a particular focus on the harder-to-reach smaller SMEs.

About the IFC-BMWK Climate Blended Finance Partnership
IFC and the German Government’s BMWK have partnered to complement the existing “Scaling Up Climate Finance through the Financial Sector” Program with a blended concessional finance component. The BMWK’s €30m blended finance contribution is expected to enable at least US$600m in IFC own-account and private sector mobilization by de-risking investments. The Program is designed to increase climate lending by participating banks in Egypt, Mexico, the Philippines, and South Africa to 30% of their portfolios by 2030, while reducing exposure to coal.

Source: IFC