IFC Provides 170 Million Rand Loan to Lula Lend to Boost South Africa’s Small Businesses

MSMEs account for roughly 34 percent of South Africa’s GDP and provide 60 percent of all jobs, according to the MSME Finance Gap Report.

In a significant move to stimulate job creation and promote inclusive economic growth, the International Finance Corporation (IFC), a member of the World Bank Group, has announced a 170 million rand (US$10 million) local currency loan to Lula Lend (Lula) — a leading South African digital lender. The financing aims to expand access to working capital for micro-, small-, and medium-sized enterprises (MSMEs), the backbone of South Africa’s economy.

Strengthening South Africa’s Small Business Sector

The partnership is expected to unlock vital funding for thousands of MSMEs, with at least 80 percent of the loan directed toward micro and small enterprises. These businesses are among the most critical yet financially underserved segments of the economy.

MSMEs account for roughly 34 percent of South Africa’s GDP and provide 60 percent of all jobs, according to the MSME Finance Gap Report. Despite their importance, fewer than 5 percent of formalized MSMEs currently have access to credit. This financing shortage limits their ability to grow, innovate, and generate employment — particularly in a challenging economic climate marked by inflationary pressures, energy constraints, and high youth unemployment.

“At Lula, our mission is to empower every SME in South Africa to succeed, because when small businesses thrive, our entire economy and society move forward,” said Trevor Gosling, CEO of Lula. “This partnership with IFC will enable us to extend more working capital to more SMEs, fueling their growth and long-term success. We’re excited to work alongside IFC to drive meaningful impact for SMEs.”

Digital Lending: A Lifeline for Underserved Businesses

Lula Lend has emerged as a pioneer in digital financial inclusion, offering uncollateralized, fully digital loans to small enterprises that traditional banks often exclude due to a lack of formal credit history or collateral. The company leverages data-driven algorithms and real-time financial analytics to assess creditworthiness quickly and accurately — a model that has proven especially effective in reaching entrepreneurs who might otherwise remain excluded from formal financial systems.

Approximately 90 percent of Lula’s clients are first-time business borrowers, underscoring its role in democratizing finance for small business owners. By simplifying access to capital and eliminating lengthy approval processes, Lula enables enterprises to secure funding within days — allowing them to meet payroll, invest in equipment, and expand operations.

“Our partnership with Lula leverages its innovative digital model to expand access to finance for South Africa’s small businesses—empowering entrepreneurs to create jobs and drive a more resilient, inclusive economy,” said Ethiopis Tafara, IFC’s Vice President for Africa.

IFC’s Broader Mission: Catalyzing Private Sector Growth

The loan to Lula builds on a long-standing partnership between IFC and the company that began in 2019, reflecting IFC’s wider mission to foster inclusive economic development through private sector innovation. By investing in digital finance solutions, IFC is supporting financial technology (fintech) as a catalyst for job creation, entrepreneurship, and poverty reduction.

Since 2018, IFC has invested and mobilized approximately US$1.4 billion (nearly 25 billion rand) to support MSMEs through local banks and financial intermediaries in South Africa. Over the past five years, IFC has committed over US$5.2 billion in the country — its largest exposure in Africa and fifth largest globally.

These investments align with IFC’s broader Africa strategy to increase access to finance, promote digital transformation, and strengthen economic resilience in the face of global challenges.

Supporting Economic Recovery and Job Creation

South Africa’s small business sector has been hit hard by economic shocks, including the COVID-19 pandemic, energy instability, and fluctuating market conditions. Many small firms struggle with limited liquidity, insufficient credit history, and a lack of financial literacy — challenges that digital lenders like Lula Lend are helping to overcome.

The IFC-Lula partnership is expected to have multiplier effects on the economy by:

• Improving access to working capital for micro and small businesses.

• Creating and sustaining jobs, particularly among youth and women entrepreneurs.

• Enhancing business productivity and resilience through better financing tools.

• Encouraging formalization among informal businesses.

By facilitating local-currency lending, IFC also helps mitigate foreign exchange risks that can burden smaller enterprises, ensuring that loans remain stable and predictable.

A Step Toward Financial Inclusion

Lula’s technology-driven approach reflects South Africa’s rapidly evolving fintech landscape, where digital solutions are reshaping access to finance. The company’s user-friendly online platform and automated lending system provide a model for how technology can deliver scalable, affordable solutions in emerging markets.

In recent years, the company has expanded its product range to include revolving credit facilities and business cash advances, providing greater flexibility to entrepreneurs seeking short-term funding for inventory purchases, payroll, and operating costs.

This new IFC investment will enable Lula to expand its loan portfolio, reach new regions, and serve previously unbanked entrepreneurs, thereby contributing to broader financial inclusion across the country.

South Africa’s MSMEs: The Cornerstone of Economic Transformation

Despite facing persistent barriers, MSMEs remain the engine of South Africa’s transformation, driving local innovation, industrial diversification, and employment. Expanding access to credit for these businesses is a national priority, central to the government’s Economic Reconstruction and Recovery Plan (ERRP).

According to the IFC, strengthening small business financing could unlock billions in economic output and significantly reduce unemployment, which currently stands at one of the highest rates globally.

The IFC-Lula collaboration therefore represents more than just a financial transaction — it’s an investment in inclusive growth, entrepreneurship, and the resilience of South Africa’s economy.

“This initiative demonstrates how partnerships between development institutions and fintech innovators can close the credit gap for small businesses, empower communities, and foster long-term economic stability,” Tafara added.

Looking Ahead: Empowering Entrepreneurs for the Future

With this new funding, Lula is expected to extend thousands of new loans to South Africa’s MSMEs over the coming years, enabling them to expand their operations and hire more workers. IFC and Lula also plan to collaborate on financial education programs and digital tools to help entrepreneurs strengthen their business management capabilities.

As digital finance becomes increasingly central to Africa’s economic transformation, initiatives like this are paving the way for a more inclusive, innovative, and resilient financial ecosystem.