Sunday , May 29 2022

Funding: $ 331 billion to support African SMEs


The situation of small and medium-sized enterprises in Africa, which is very important for the economies of the countries of the continent, is worrying. Their funding needs are $ 331 billion. Needs that constitute a real obstacle to their development and hence the economic development of the continent's states.

"In Africa, there are 44 million formal SMEs representing 33% of the continent's gross domestic product and 45% of jobs. However, 70% of them do not have long-term funding, and 80% do not have access to bank credits"Said Thameur Hemdane, co-chair of participatory funding for Africa and the Mediterranean (FPAM), who spoke at the Forum du crowdfunding in Africa, in the Senegalese capital, Dakar, this week. "Their funding needs are $ 331 billion. The financing gap is the first barrier to the development of African SMEsHe added.

Hemdane's concerns are shared by Laurent Gonnet, a financial sector specialist at the World Bank (BM), who, quoting the Market Intelligence Initiative (SMI Forum), suggested that West Africa would have $ 10 billion to finance official SMEs. "For Senegal, it's a billion dollars. Therefore, the World Bank and other partners must implement all the conditions for this gap to be solved between 5 and 10 yearsThe World Bank expert continued.

crowdfunding, a credible but inadequate alternative

To overcome this gap, several actors are moving towards crowdfunding (crowdfunding). But the African Development Bank (AfDB) notes that, although this means reliable, it is not enough. "In 2017, the total amount of crowdfunding in Africa was 153 million dollars. The system is not yet fully secureValérie Dabady, head of the Resource Mobilization and External Financing Department at AfDB, said.

Laurent Gonnet proposes a solution based on three levers. "The first is competition in 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 at the central bank, the Ministry of Finance or other public forcesThe financier explained. For Gonnet, "often the banker requires a building, a house, a land as a guarantee without which there is no funding. This does not help young firms; funding will finally go to those who already have wealth". Laurent Gonnet calls on decision-makers to develop "imperative' "an extended collateral regime where other types of collateral will be offered to bankers".

You must do "sinking banks, making them understand that SME financing can make moneyAdded Gonnet. Also, "Ministries of Finance [doivent] has put in place guarantee funds that provide banks with an extra level of comfort by allowing them to finance a little more SMEs"Argues Gonnet, World Bank's chief financial officer.

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