IFC extends local currency financing to Lula to support South Africa’s small business sector

A new IFC loan to digital lender Lula aims to expand access to working capital for South African MSMEs, a segment central to employment and economic activity yet significantly underserved by traditional credit channels.

The International Finance Corporation (IFC), part of the World Bank Group, has announced a new local currency investment in Lula Lend (Lula), a South Africa–based digital lender, as part of its strategy to strengthen small business growth and job creation in the country.

The transaction involves a 170 million rand loan—approximately US$10 million—that will be directed toward expanding working-capital solutions for micro, small and medium-sized enterprises (MSMEs). At least 80 percent of the funding is earmarked for micro and small firms, which continue to face the greatest challenges obtaining credit from conventional financial institutions.

MSMEs play a significant role in South Africa’s economy, contributing an estimated 34 percent of GDP and close to 60 percent of national employment. Despite this, access to finance remains limited. Data from the MSME Finance Gap report indicates that only around five percent of formal small businesses in the country have access to credit, restricting their ability to hire staff, invest in operations or navigate economic shocks. The IFC–Lula initiative is designed to help close part of this financing gap.

Lula’s chief executive, Trevor Gosling, said the company’s mission is to expand financial access for local businesses and that the additional capital will help reach more entrepreneurs seeking short-term funding. IFC Vice President for Africa, Ethiopis Tafara, noted that the partnership builds on Lula’s digital-first model, which allows lenders to reach firms that typically remain outside the traditional banking system.

Founded a decade ago, Lula offers unsecured, fully digital loans using proprietary credit-assessment tools and alternative data. This approach enables the platform to support businesses that may not have formal credit histories or collateral. Roughly 90 percent of its customers are first-time borrowers, underscoring the company’s role in widening access to finance.

The collaboration between IFC and Lula began in 2019. Over time, it has aligned with IFC’s broader agenda to promote private-sector development in emerging markets by improving financial inclusion and supporting job-generating enterprises. IFC has made several investments through South African financial institutions to expand MSME lending, totaling about US$1.4 billion since 2018. Over the past five years, the organization has deployed more than US$5.2 billion in South Africa, its largest exposure in Africa.

Benefits for the region

The new investment contributes to strengthening South Africa’s financial ecosystem by expanding the pool of lenders capable of reaching underserved small businesses. Improved access to working capital is expected to support business continuity, employment stability and the growth of local supply chains—factors considered important for broader regional economic resilience.