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Financial Inclusion for Townships: E Squared Investments Backs Setana Capital’s Mission
E Squared Investments continues to support Setana Capital’s mission to transform the township economy by facilitating access to financial services for the informal sector.
E Squared recently provided funding to Setana Capital to enhance the development of its technology system, provide the capital needed to roll out its embedded finance products, and further scale its business.
Setana, an embedded finance and working capital provider, aims to support small businesses within the township areas in South Africa and promote financial inclusion by providing informal businesses with access to short-term working capital solutions, enhancing their ability to manage cash flows.
The township economy is home to many of South Africa’s small and medium-sized enterprises (SMEs) that contribute significantly to job creation and community development.
Despite its increasing contribution to job creation and GDP, this dynamic sector faces numerous challenges impeding the collaboration between SMEs and formal financial institutions and, ultimately, access to finance.
These include stringent collateral requirements, complex application processes, and a lack of credit history, all compounded by many township entrepreneurs’ challenges with financial literacy and a limited understanding of financial management and accounting practices, hindering the potential for growth and success.
Setana mainly concentrates on providing capital to businesses that need support urgently, especially those selling goods that people always need, and places emphasis on providing capital to environments where they can build a defensible moat through their product, process, and unique business model that focuses on funding the value-making process.
In informal convenience stores known in South Africa as Spaza shops, they partner with major wholesaler brands and use a proprietary and innovative credit scoring mechanism to finance the purchase of stock for SMEs rather than provide conventional cash lending. This is achieved by utilizing transactional data analysis to identify eligible wholesalers for credit allocation. Qualifying Spaza shop owners then use this credit allocation to procure stock and settle debts within a flexible 14—to 30-day repayment window tailored to their cash flow cycles.
The capital deployed by Setana, therefore, creates a flywheel effect for growth for both the SME and the partner channel while building stickiness between Setana, the partner, and the SME. This flywheel effect was piloted through an innovative financing facility through the E Squared Investments Social Enterprise unit. Setana redeployed capital nine times over, providing the team with the insights to test their offering thoroughly.
Cheryl Jacob, Head of Social Entrepreneurship at E Squared Investments, said, “Our agility to deploy E Squared’s risk capital to pilot innovative financing mechanisms and support social enterprises like Setana to prove their model is a unique approach that enables us to have multiple impact outcomes through one investment.”
Shaun Coetzee, Acting Head of Investments at E Squared Investments, said, “E Squared is very excited about Setana and the amazing work that they are doing in the informal township economy. We’ve been privileged to have walked alongside Setana from the ideation stage via our Pathways Program and our Social Enterprise portfolio to where the business is today. Our journey is set to continue as our latest investment via E Squared Ventures will assist Setana as they grow and expand their business, providing much-needed access to finance for Spaza Shops and beyond. We see our funding as catalytic for Setana and their unbanked clients, allowing them to grow their revenues and contribute significantly to job creation and community development. The Setana team has demonstrated that they can successfully lend into this segment of the economy via their innovative and robust model, plugging a financing gap that traditional financial institutions do not cover.”
The founding team consists of Khanya Ndzululeka, Prince Nwadeyi, Ntandoyenkosi Shezi, and Thabiso Moroe; together, they bring a wealth of expertise in the financial and trade sector.
Prince Nwadeyi, co-founder of Setana Capital, said, “We focus on providing services to remote, underserved, and unbanked communities while concurrently generating multi-layered employment opportunities and contributing to the transformation and increase of economic participation by enabling the informal trade sector to participate in the formal sector. We provide credit where we believe it drives revenue growth for both our partners and the SMMEs, leveraging alternative methods of credit scoring, which we developed in-house; furthermore, we intimately understand the challenges facing African entrepreneurs; access to flexible and innovative working capital is one of them.” Nwadeyi further expanded by stating that Setana’s vision is to transform this narrative by becoming a beacon of financial empowerment for SMEs across the continent. We’re starting with embedded finance but have plans to diversify into other product lines strategically. Success for us means turning the struggle for working capital into a seamless reality for every African entrepreneur, catalysing growth, and prosperity.
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