Smaller businesses could soon be given a helping hand by the Industrial Development Corporation (IDC), the state-owned financial institution, after it said it was considering establishing a microfinance institution.

The IDC said it is weighing up the idea of investing between R100 and R200m into a fund that would provide loans to smaller businesses that commercial banks often deem too risky.

The move would fill a gap in the market not currently covered by other development finance institutions. The IDC has not specified the minimum threshold for funding from the new fund, though it has been speculated the loans would be between R5000 and R100,000.

Previously the IDC’s funding has tended to focus on larger organisations, including the country’s parastatal’s, with a minimum funding threshold of around R1m.