‘Less gov’t borrowing needed to ease SME finance burden’

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The high cost of capital for small businesses is largely being driven by government borrowing, Ivan Mandela, CEO at SHONA Capital, said.

Speaking during an exclusive interview with the New Vision on June 18, Mandela said continued borrowing from the domestic market creates a situation where investors expect a premium above government yields.

“At 17% on a 10-year bond, you're essentially saying every investor who has some form of capital must have a premium above that to have reason to invest in a small business,” he said.

He said the expectation pushes the overall cost of capital too high for small businesses, leading to “outrageous interest rates” in the market. The core solution, according to the Mandela, lies in the government borrowing less domestically.

SHONA Capital is among the few financial institutions designing products to disrupt traditional lending models tied to collateral such as land. Instead, they focus on the viability of a business model to generate cashflow.

“80% of the loans we give here have zero collateral," he said, explaining that they rely on the entrepreneur’s character, experience, and the personal resources and time already invested in the business.

Find the full exclusive interview in the June 21, 2025, edition of Weekend Vision. Ivan explains his more than 20 years’ experience on why SMEs fail to secure funding from financiers, how SMEs can make themselves attractive for funding, and sourcing alternative funding, among others.