Some 80 percent of Africa’s private sector is comprised of small and medium firms. But a lack of expertise at banks, a limited supply of funds, and the risks associated with lending to less established entrepreneurs mean that smaller companies in the region often cannot access the cash they need to develop and expand. IFC puts a high priority on finding solutions to help small and medium businesses thrive.
IFC in March 2007 kicked off the Africa Micro, Small, and Medium Enterprise Finance Program with a $6 million loan to Burkina Faso’s Banque Agricole et Commerciale du Burkina. The program aims to boost lending to smaller businesses across Sub-Saharan Africa by investing in and providing extensive advisory services to banks so that they can better serve micro, small, and medium enterprises. The idea is to help banks realize that lending to smaller business can be profitable and raise their capacity to reach clients that they otherwise would have quickly turned away.
IFC’s board has approved $200 million in funds for the program, and the project team is eying some 25 financial institutions in 17 countries across the region as potential candidates in its first phase. Those numbers could climb higher if the project yields promising results—a likely prospect given the strong early demand.
“What we are trying to show is that lending to small and medium businesses can be profitable for banks,” said IFC Operations Officer Terry Wyer, , who was in Burkina Faso in early March to launch the program. IFC is looking for banks that have a strong network of branches to reach smaller businesses to participate in the program.
That’s good news for both small business owners and bankers across Africa. The program will seek out second tier domestic banks that have not been IFC clients in the past, enabling IFC to extend its reach beyond its present client base and more widely spread its development impact in the region. Working with smaller and less established institutions will also help strengthen Sub-Saharan Africa’s banking sector
Two other IFC initiatives complement the Africa MSME Finance program. The first focuses on building the capacity of smaller businesses to access financing more easily from commercial banks by improving their management and accounting skills. Another focuses on easing stringent collateral requirements and facilitating bank lending to smaller businesses.
These programs are important because smaller businesses in Sub-Saharan Africa often do not have the financial documentation that banks require to assess their commercial viability and frequently have little or no collateral to provide in exchange for funds. An integrated package of programs to make it easier for smaller businesses to thrive and contribute to Sub-Saharan Africa’s development.
For more information contact:
Houtan Bassiri
Communications Officer
Johannesburg, South Africa
Tel: +27 11 731 3179
E-mail: hbassiri@ifc.org
Published March 26, 2007
