Monday , April 19 2021

Financing: US $ 331 billion to support African SMEs



The situation of small and medium-sized enterprises in Africa, which are very important for the economies of the countries of the continent, is a cause for concern. Its financing needs are $ 331 billion. Needs that constitute a real obstacle to its development and therefore to the economic development of the States of the Continent.

"In Africa, there are 44 million formal SMEs, representing 33% of the continent's Gross Domestic Product and 45% of jobs. 70% of them lack long-term financing and 80% do not have access to bank credit"Said Thameur Hemdane, co-chair of Participatory Financing Africa and the Mediterranean (FPAM) speaking at the Forum du crowdfunding in Africa, in the Senegalese capital, Dakar, this week. "Its financing needs are $ 331 billion. The financing gap is the first obstacle to the development of African SMEsHe added.

Hemdane's concerns are shared by Laurent Gonnet, chief financial officer of the World Bank (WB) who, citing the Strategic Marketplace Initiative (SMI Forum), suggested that in West Africa there would be a $ 10 billion Formal SMEs. "For Senegal, it's a billion dollars. The World Bank and other partners must therefore put in place all the conditions so that this gap can be resolved between 5 and 10 years.The World Bank specialist continued.

crowdfunding, a credible but insufficient alternative

To overcome this gap, several actors are turning to crowdfunding (crowdfunding). But the African Development Bank (ADB) believes that, while that means being reliable, it is not enough. "By 2017, the total amount of crowdfunding in Africa was $ 153 million. The system is still not completely secureSaid Valérie Dabady, head of the AfDB's Resource Mobilization and External Financing Department.

Laurent Gonnet proposes a solution based on three levers. "The first is competition within the financial sector because if it does not exist, stakeholders will not go to SMEs. The second lever is the credit infrastructure that annihilates the symmetry of information between the banker and his client. The third is the need for public intervention with the central bank, the Ministry of Finance or other public forcesExplained the financier. For Gonnet "often the banker asks for a building, a house, a land as collateral without which there is no financing. This does not help young companies; the funding will finally go to those who already have wealth"Laurent Gonnet asks decision-makers to develop"imperatively(I.e.an extended guarantee scheme in which other types of guarantees will be offered to bankers".

You have to do it "salivating banks, making them understand that SME financing can make moneyAdded Gonnet. Besides that,Ministries of Finance [doivent] to create guarantee funds which offer banks an additional level of comfort to enable them to finance SMEs a bit more"Argues Gonnet, senior specialist in the financial sector at the World Bank.


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