Chairperson, the answer to (a)(i) is that the risks that Khula is facing are essentially the same as those faced by any other lending institutions. Khula, therefore, needs to ensure that its credit passing and collection are in line with the lending criteria and benchmarked against similar development finance institutions. Khula does however understand the requirements of small businesses, perhaps even better than many other financiers. It is more sensitive to the requirements of small businesses and the problems that may result in them not being able to meet payment obligations.
The answer to (a) (ii) is that Khula does not presently make use of loadable funds.
The answer to (b) is that Khula is a development finance institution committed to providing finance to small and medium-sized enterprises, SMEs, particularly those that are unable to borrow from banks. Khula's risk appetite is therefore different to that of commercial banks. It is prepared to fund businesses that experience problems obtaining bank finance, namely start-up businesses; business in early phases of expansion; businesses that cannot provide collateral for their loans; and businesses requiring loans of less than half-a-million rand. Its priority target market includes businesses owned by women and businesses in the less economically developed provinces.
During the 2008-09 financial year, Khula disbursed R281 million to 2 829 SMEs, of which 36% were in targeted provinces. The main criteria Khula uses to determine whether it will lend to a small business is to evaluate whether the business will be sustainable. If necessary, it will provide mentorship to support and assist business owners in becoming established. Thank you.