As part of its Strategic Initiative for Africa, IFC puts a high priority on the development of small enterprises through supporting a number of financing and advisory services initiatives on the continent.
The SME Solution Center pilot program is an innovative $8.95 million initiative approved for development in 2003. The SSC concept attempts to provide a holistic and comprehensive package to meet the needs of small enterprises in Africa.
"The SME Solution Centers bring all key business services under one roof thus enabling us to provide a comprehensive package of assistance to our small business clients," said IFC Director for Sub-Saharan Africa Thierry Tanoh. "Clients are able to access business information, receive training and business mentoring, and apply for financing from one place."
In January 2007, the program successfully closed its Kenya Business Partners International Fund after successfully raising $14.1 million that will go into financing Kenyan businesses through equity and loan investments. It is the second risk capital fund currently active in Africa under the SME Solutions Center program. The first was closed in Madagascar in December 2005 after raising $10 million.
Through the centers, clients are also able to tap into in-house business incubation centers, where they gain access to shared resources, such as market and sector information, business diagnostics, development of managerial skills, and critical mentoring and business development support.
Assessing the Impact
Launched in June 2004 and March 2005 respectively, the Madagascar and Kenya centers have made significant progress in the face of major challenges.
Today, the centers are actively extending services to an increasing number of clients, and providing important lessons on how best to leverage financial products and advisory services in support of small businesses.
More than 450 small businesses have received enterprise level support to improve their processes. Over 3,000 employees from these businesses have participated in training provided by the centers. Sixteen companies are currently part of the incubation centers. More than 170 business plans have been received out of which many are being considered for possible investment. To date, $1.8 million has been disbursed and a further $7 million is expected to be invested in qualifying small enterprises by December 2008.
Development impact is a high priority of the centers. "Our key challenge is to make sure that we are getting the right impact in terms of jobs creation, skills development, and overall private sector expansion. It is important to have in place the right tools to track progress" noted Ibrahima Diong, who runs the pilot program.
The Challenge of Raising Risk Capital in Africa
Raising the necessary capital to support the access to finance component of the SME Solution Centers has, perhaps, been one of the biggest challenges and successes of the program.
Working with Business Partners Limited, a leading South African provider of risk capital to small and medium enterprises, IFC set up Business Partners International as fund manager. Of the $24.1 million in risk capital raised by Business Partners International, IFC contributed 32 percent and 35 percent of the capital. In addition, IFC provided a grant of $2.5 million towards the set up costs of the fund manager.
"We managed to overcome institutional investor skepticism in risk capital funds that target small and medium enterprises. This was not easy at all but having an experienced fund manager such as Business Partners on board helped a great deal," said Haydee Celaya, Director of IFC’s funds department.
Mark Paper, Chief Operating Officer of Business Partners International agreed. “Raising the funds has certainly been a challenge, but just as difficult has been finding and recruiting qualified and motivated local staff to manage the funds.”
Participating investors in the funds comprised international investors such as the European Investment Bank, Commonwealth Development Corporation, Norfund, Doen Foundation. A number of regional and local institutions invested as well, including the Assurance Reassurance Omnibranche in Madagascar, and Trans Century and the East African Development Bank in Kenya. |
 |
Looking Forward: Managing and Meeting Expectations
Building on this early success, the SSC pilot program is looking to step up the pace of its activities by increasing the disbursement levels and scaling up the related advisory services such as training, skills development, and business planning support.
Besides directly supporting small enterprises through their core activities, the centers are increasingly providing a platform through which IFC is able to implement many of its other programs, in particular, the IFC Private Enterprise Partnership for Africa. Five IFC PEP Africa program, including Madagascar Leasing, the SME Enterprise Development Initiative, the SME Export Promotion Program, and the Growth Oriented Women Entrepreneurs program are currently being implemented within the SME Solution Centers.
For more information contact:
Daniel Musiitwa
Communications Officer
Johannesburg, South Africa
Tel: +27 11 731 3175
Email: dmusiitwa@ifc.org 
