• Nedbank has announced the launch of the Indalo Fund, which is designed to “change the way that entrepreneurs are funded”.
• One of the principles for funding will see SMEs receive 50% of the R250 000 Indaloaccel grant if they commit to creating at least five full-time jobs at the minimum wage.
• Enterprises that exceed their targets by 100 percent within 12 months are rewarded with the payment of the remaining 50 percent of the grant.

Nedbank has announced the launch of a new SME-focused initiative in the form of the R10 million Indalo Fund at the Indalo Inclusive Symposium at the Council for Scientific and Industrial Research (CSIR).

The financial institution created the Fund on the back of previous successful partnerships with Indalo Inclusive, which saw the creation of 215 enterprises with an average income of R5 933 283 each.

“Many of these enterprises are now at the stage where they can become eligible to attract larger investments from commercial lenders to scale significantly,” Nedbank explained in a release shared with Hypertext.

“When we launched our commitment to a green economy that works and delivers on the United Nations Sustainable Development Goals, we were clear that we wanted to make a significant positive impact to help create a new type of economy. Building on our experience over the past 3 years, we have decided to enhance the funding model in the final phase by introducing incentive- and performance-based grants,” added Poovi Pillay, executive head of Corporate Social Responsibility at Nedbank.

Here he pointed out that the current Indalopreneur programme covers four phases, each at its own grant level. The final phase, Indaloaccel, is reached by enterprises with a business model that already has been proven to be successful. These enterprises are considered ready for investment, with the new Indalo Fund coming into play only in the Indaloaccel phase.

Pillay went on to note that in terms of the new funding principles, SMEs will receive 50 percent of a R250 000 Indaloaccel grant at the outset if they commit to creating at least five full-time jobs at minimum wage.

On top of this, they will also have to reach a number of targets relating to their environmental, social, and economic impact.

The SMEs that exceed their targets by 100 percent within 12 months are rewarded with the payment of the remaining 50 percent of the grant. Those who achieve only 50 percent above the job-creation target will receive only half of the remaining 50 percent (~R62 500).

“In other words, we are linking the final R250 000 to the ability of the enterprise to reach and exceed agreed-upon targets. This is an important new approach, because it prepares them to grow out of grant dependence and make them compete for funding from investors who want returns instead. It also means that part of the capital committed by Nedbank is recycled, enabling us to help more entrepreneurs. Our calculation is that by making part of the Indaloaccel grant potentially recoverable, we would be able to reach an extra 8 enterprises,” said Pillay.

“Overall, our aim is to increase the impact that our funding makes,” he concluded.

Nedbank stated that the first phase of the Indalo Fund will run for 18 months, during which its entire capital of R10 million will be disbursed. There will, however, be some recovery of the money based on the targets and completion of funding process outlined above.

After that, the financial institution will need to recapitalise, and will then run for the initiative for a further 36 months. Nedbank and Indalo Inclusive will also be conducting a comprehensive impact assessment at the end of this five-year period, the financial institution ended.

To find out more about the Indalo Fund, head here.