A shot in the arm for JP Morgan’s $1 million SME initiative

Propelled by evidence that its business development support (BDS) programme is producing the goods, the South African office of global financial giant J.P. Morgan is to launch an ‘independent BDS rating platform’.

This emerged last week when JP Morgan welcomed new investors into its $1m SME Catalyst for Growth Programme (C4G Programme). The new investors are Cadiz Asset Management (through their Protected High Impact Fund), GroFin and Imprint Capital.

JP Morgan said it will develop and launch an independent rating platform to help bring accountability and transparency to the South African BDS market.

John Coulter, Senior Country Officer for J.P. Morgan in Sub-Saharan Africa said “The ratings tool that will be developed in the coming year will also start to address the inconsistent quality that currently exists across BDS providers and will enable SMEs and investors to have an independent and verified platform of information. It can also accelerate growth in the BDS market across Africa by diverting scarce resources to the most impactful providers”.

The firm said “Historically, the inability to assess or compare different types of BDS has been a hurdle to SMEs seeking assistance to grow. The new C4G Programme rating platform will address this knowledge gap by providing performance data on BDS providers across the country. The ratings will be based on information gathered from SMEs that have received support from these types of providers in areas such as business growth, improvement of systems, financial performance and literacy”.

Added Coulter “We are very pleased with the progress of this innovative C4G Programme for SMEs and excited that three investment partners have joined the initiative after only one year”.

The C4G Programme, supported by the JPMorgan Chase Foundation, is the firm’s first significant social investment in the SME space in South Africa, with an investment of more than $1 million. The two-year pilot programme is run in collaboration with three core partners: Aurik Business Incubator (Aurik), Raizcorp and Dalberg Global Development Advisors (Dalberg).

Coulter said the new investment allows further scale to the C4G Programme, and is a strong independent endorsement to the programme.

He said evidence shows that after one year into the C4G Programme, the entrepreneurs’ businesses have significantly improved, which indicates that strengthening business systems is leading to enhanced revenue, increased employment and better access to finance. Since the programme was initiated in 2012, the overall average increase in revenue of participating SMEs was 43%, with a 19% increase in permanent employees. The SMEs also appear to be having more success in accessing capital, as the percentage of successful applications for finance among the group has risen by 13%.

Speaking at a J.P. Morgan announcement the Minister for Trade and Industry, Rob Davies, said the J.P. Morgan programme has a number of synergies with the DTI’s initiatives to transform the SMME space in South Africa.

“Government alone cannot address the enormous need to create more entrepreneurs,” said Davies. We need to collaborate with the private sector to empower many more South African people to find a livelihood and to create job opportunities. In line with this, the dti  has focused on initiatives such as incubator programmes to ensure that SMMEs graduate into the mainstream economy, as well as addressing red tape, as we realise complex requirements are huge impediments inhibitors to small business”.

Lord Renwick, Vice Chairman of J.P. Morgan said the Programme reaffirms J.P. Morgan’s global commitment to South Africa and the development of SMEs in the country. “Over half of South Africa’s current employment is created by small to medium enterprises. The additional efforts that government is making to stimulate this important sector will ultimately have a positive effect on South Africa’s economy.”

Agostinho Zacarias, UNDP Resident Representative in South Africa, said “The UNDP is committed to SME development to promote growth that is both inclusive and sustainable. We are proud to be in partnership with the Department of Trade and Industry in the implementation of a supplier development programme that uses best practice from similar middle income countries globally”.

Allon Raiz, the CEO from Raizcorp, said “It is wonderful to see such a large organisation put their weight behind a programme in a way that keeps the entrepreneurs’ best interests at heart”.

Pavlo Phitidis, the CEO from Aurik, said “The J.P. Morgan C4G Programme provided us with the opportunity to prove the benefit of our BDS programmes across start-up, early stage and growth companies in the eye of the public domain”.

Our view at ujuh.co.za. The JP Morgan initiative comes on the back of an explosion of BDS initiatives in South as the country realizes that the solution to its high unemployment levels lies in the SME sector. Everywhere you look there is a BDS programme promising heaven and earth to entrepreneurs and funders. While this is good for the development of entrepreneurial culture, arguably the space is also fertile for chance takers. The development of an independent standard will certainly help separate chance takers from the real deals. Having said that the rating game as you know dear reader can be infested by politics.


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