CEDA reclaims 'lost' SMME market

| Friday October 2, 2009 00:00

The Citizen Entrepreneurial Development Agency (CEDA) recently unveiled an arsenal of initiatives and policy changes aimed at wrestling back the Small, Micro and Medium Enterprise (SMME) market from commercial banks and other lenders.In recent years, commercial banks and other lenders have aggressively entered the SMME finance market with attractive products and services, effectively tackling CEDA on its own turf. Analysts said the SMME market slowly drifted away from CEDA, partly due to perceptions about the slim chances of obtaining CEDA support and the relatively simpler processes for obtaining commercial bank finance. While CEDA was offering much lower interest rates, unsecured loans, longer repayment periods and more support, commercial banks were able to leverage on perceptions that obtaining a CEDA loan was near impossible, in the process gaining a foothold in the SMME market. The entry of commercial banks and lenders into the SMME finance arena, some analysts believe, challenged CEDA's dominance and continued relevance in the area of development finance.

However, through its revised guidelines and launch of its Third Strategic Plan (2009-2012), the Agency has taken the fight to its rivals and detractors. Part of CEDA's arsenal of initiatives includes revised limits for loans of P4 million, up from one million, and up to P30 million in the Venture Capital product.

With the new loan limits, the Agency has also reviewed its interest rates, charging five percent per annum for loans below one million pula and seven percent for loans above that. A Godsend for CEDA beneficiaries has been that the Agency is currently adjusting loan accounts to reflect the lower interest charge for loans below one million pula. In addition, CEDA has revised its repayment periods to 15 years from seven years and consolidated its various product offerings under a one-stop shop model. Thus, the CEDA Venture Capital Fund and the Credit Guarantee Scheme have been brought back into the Agency's ambit, eliminating the need for clients to run around for assistance.

The Agency has also introduced new products such as debt and equity financing, credit guarantee for short and long-term, letters of credit/performance bonds, and a Citizen Entrepreneur Mortgage Assistance Equity Fund (CEMAEF), among others. CEDA has also introduced an invoice discount/factoring product aimed at helping the cash flow of citizen-run businesses.

Part of the waves of change at CEDA includes the appointment of a firm of independent consultants to tackle the contentious issue of rejected applications, as some of these applicants have previously accused the Agency of lacking the capacity to understand all business proposals. CEDA is also reaching out to government procurement entities to open up opportunities for its beneficiaries, as part of its citizen development mandate.

CEDA Chief Executive Officer, Dr Thapelo Matsheka, has conceded that the Agency lost its foothold over the years, due primarily to structural and systemic challenges.'This is the only institution that is there for the average Motswana,' he said at a recent interaction with clients. 'It is the only one that can give you a loan without security. We are the first point of contact, but I know that we have not always been in that position and this is a great concern for us.'It concerns us that people are going elsewhere before coming to CEDA. They are being told to try us as if we are the last resort. How can you first go to a bank charging more than 20 percent interest, instead of the institution offering five percent?'

As though to counter perceptions that CEDA is squeezing the private sector out of SMME finance, Matsheka stressed that the Agency's goal was to be the government's citizen economic empowerment arm.' We believe that even if we cannot help you, you should still benefit from the advice we can give you,' he said. 'You should not have false confidence in your project, and we will give you advice about it.

'The difference with us is that we assess each and every single application. We have to hear it out. Other institutions do not bother. They say we don't do this or we don't do that or we don't assist small entities. We have 6,  000 applications pending and we have to study each and every one of them and approve those that qualify.'

CEDA Deputy CEO (Operations), Lorato Morapedi, explained that CEDA was focusing on its client base's needs in order to advance its mandate of citizen development. She said the Agency could not afford to rest on its laurels while its clientele was being disadvantaged as a result. Morapedi added that CEDA also differentiated itself from banks in that it insists on providing advisory services to all applicants.

'Just because we are offering five percent and seven percent interest rates and are the cheapest in town, should we not worry about customer service?' she queried. 'No, we need to focus on the customer and customer retention. Where there are many customers, there will always be a return on investment.'

CEDA plans to hold a Customer Week in the near future and to introduce and circulate a Customer/Public Satisfaction Survey every year. The Agency plans to hold regular Customer Forums and foster similar events between and across business sectors.