Africa Micro,Small and Medium Enterprise Finance

Tomatoes Traders in Nima Market, Ghana. © EnterpriseAfrik

Banks in Africa face important challenges in growing their micro, small and medium enterprise lending portfolios and serving the needs of small businesses.

Capacity constraints in critical areas such as sales, product development, and risk management prevent many banks from growing their credit activities in this market segment.

In addition, the shortage of long term resources also means that banks are unable to mobilize the necessary capital to support the long term financing needs in the micro, small, and medium enterprise sector.

Seizing Market Opportunities
IFC’s Africa Micro, Small, and Medium Enterprise (MSMEs) Finance Program is designed to provide support to financial institutions to rapidly and profitably ramp-up their banking services to micro, small, and medium enterprises while maintaining good asset quality. The program provides a combination of advisory services and financial products to participating banks to help grow their product offerings to MSMEs. IFC provides resident advisors, short-term experts and tools from top advisory firms from around the world to address the challenges that financial institutions face in working with smaller business.
On a case-by-case basis and as required by participating banks, the program also addresses challenges such as risk management, NPL management, human resources development, credit cycle tools, including credit appraisal to collections as well as deposit mobilization.

Advantages for Participating Banks
In increasingly competitive markets where margins are shrinking and traditional sources of income are becoming less attractive, IFC’s Africa MSME Finance Program offers the following advantages for participating banks:

• Assistance in developing a profitable MSME business line, which can lead to increased portfolio volume and -diversification, a higher return on average equity, and increased market share.

• Technology- and knowledge transfer through the implementation and application of successful and proven MSME banking tools and –methodologies, as well as through the development of lending, deposit and other SME banking products.

• Assistance establishing a sustainable market presence ahead of competitors

• Opportunity to develop a long-term relationship with IFC, a full-service financial institution, with potential to meet multiple financing and advisory needs in areas including trade finance, housing, gender finance products, and small business finance

Currently 13 banks throughout Sub-Saharan Africa are participating in this program with another 2 to join in the near future.

Source: International Finance Corporation (IFC)