Entri AdminKhanya Okumu sits down with Entrihub and talks Development Finance Institutions (DFI). In Part 2, we cover what DFIs look for when deciding which companies to support.
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See Part 1 andPart 3.
Transcript:
Question 1: What do DFIs look for in companies?
Khanya: From an entrepreneur's point of view they would probably say "too much"! But essentially, when we're looking at an entrepreneur, at the end of the day, we're looking at two things. You're looking at the "jockey" and you're looking at the "horse".
In the SMMEs space, the jockey really is the most important thing. So, we need to understand the person behind the business. What is it that you're trying to achieve? What is your passion? Where is it that you're going to take this business? Then we look at the horse. Fundamentally, is it a sustainable business? Is it something that would be viable?
When you're looking at those two things what we would want, as a DFI, is an entrepreneur assessment, which is generally done internally. But then also all the normal requirements, if I can call them that. A business plan, your registration documents, your markets that you have and to show that it's something that you've thought about.
What you need to understand is that we, generally, DFIs don't fund ideas or concepts, they fund businesses. And for it to be a business, (1) they either has to be a solid business plan which is backed by a market or (2) trading history. Now, the trading history is the difficult part because generally startups you don't have anything and so that's where solid business plan is important. That's the most important document.
Question 2: Who does not qualify for DFI funding?
Khanya: Somebody who doesn't know what they're doing... To be frank. So, somebody who has not fully thought through what it is that they trying to do. Or somebody who just doesn't meet the criteria. In South Africa, generally the purpose of DFIs as well is to address the wrongs of the past, I guess, for lack of a better way of putting it. So, many funding institutions have a bias towards certain people in certain markets. Either biased towards rural enterprises; peri-urban enterprises; youth owned enterprises; women-owned enterprises; black owned enterprises. So, as a result of those biases towards that focus, the people who don't fit in there would then fall out of the scope.
Question 3: Can established businesses apply for DFI funding?
Yes. There are DFIs that look at different sides of the market. Right through from early stage and that's generally also your grant funders. Because if you think about the businesses that are at startup stage, those are the ones that its either Grant or Equity because they can't afford anything else. But you have well-established businesses where the value of unlocking that additional potential can only be achieved through additional funding. So, yes, there are very well-established businesses that also benefit from DFI funding.