Dutch entrepreneurial development bank, FMO, is investing R340 million in South African SME bank, Lula. But, importantly, it structured the deal in South African rand, reducing foreign exchange risk and enabling Lula to offer more stable and predictable lending rates to its customers. Something we’re likely to see more of in future, now that the ZAR is rallying well.

The facility follows Lula’s $10 million local-currency loan from the International Finance Corporation in late 2025, reflecting growing confidence from development finance institutions in Lula’s credit model.

For lending businesses operating in South Africa, currency mismatch remains a significant balance-sheet risk. Borrowing in dollars or euros while lending in rands exposes lenders to exchange-rate volatility, often increasing costs or compressing margins during periods of rand weakness.

By securing funding in local currency, Lula avoids this mismatch, allowing it to scale lending without importing foreign exchange risk into its loan book. According to CEO Trevor Gosling, this structure supports sustainable pricing for SMEs and reduces reliance on hedging mechanisms that can add cost and complexity.

The FMO investment also comes after Lula’s $35 million Series B round in 2023, led by Lightrock, with participation from IFC, Quona Capital, DEG and Triodos Investment Management. 

Together, these raises illustrate Lula’s strategy of combining venture equity with development-backed debt to support on-lending rather than balance-sheet growth alone.

FMO said the investment aligns with its focus on supporting fintechs that expand access to finance for underserved SMEs while strengthening competition and resilience in local financial systems.

Lula’s lending model targets SMEs that struggle to access bank finance due to limited collateral, thin credit histories or volatile cash flows. Using transaction data and cash-flow signals rather than asset-backed security, the platform is able to make rapid credit decisions and disburse funds within hours.

Over time, Lula has expanded beyond lending into business banking and cash-flow tools, positioning itself as a broader financial operating platform for SMEs rather than a single-product lender.