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That's the view of Roland Sassoon, CEO of JSE-listed Sasfin who spoke to Fin24.com on Tuesday following the release of the company's full-year results to end-June 2009.

"Big banks cannot be all things to everybody, they need to stick to what they are good at," said Sassoon, adding that lending to the small and medium enterprise sector required specialist knowledge of the industry.

"When a small business owner wants a loan from one of the [big four] banking groups, he/she will typically have to go through a call centre and a decision will be taken in an ivory tower somewhere as to whether or not to consider the loan," said Sassoon.

He said Sasfin has proven itself to be a good judge of risk. In 2008 its loan book stood at around R1.9bn, with reported bad debts of only R4.3m. For the full financial year to end-June 2009, this rose to R18.8m' still only 1% of the total amount advanced to business clients.

High security levels

A major complaint levelled at banks is that they demand high levels of security when lending to small businesses.

"Don't get me wrong - we also take high levels of security, but it is more important [as a lender] to know how to manage that security," said Sassoon.

Most of South Africa's large banks have established specialist lending units aimed at small, micro and medium-sized enterprises. These have achieved mixed success as many of the big banks have battled to manage the risk of lending to small businesses.

For example, the Absa Micro Enterprise Finance unit - which was created to finance micro and small informal businesses with a turnover range from R15000 to R300000 a year - said it serviced around 13000 clients this past year, saying the unit helped Absa to serve the industry better. To assist these small business owners, the bank has invested in a number of "community finance officers" whose role it is to educate and assist the entrepreneurs on the ground.

Gerhard Coetzee, General Manager of Absa Micro Enterprise Finance, said: "The micro enterprise finance unit opened at the beginning of 2008. It is tasked to find the right model to serve the low-income informal micro-enterprise owner within a large established commercial bank."