Supporting SME growth and competitiveness is, therefore, central to IFC’s Africa strategy. Thanks to more than 20 years experience in SME development, IFC has developed a holistic approach to enhancing SME competitiveness that offers solutions to address key challenges SMEs face.
The following four ‘building blocks’ describe IFC’s approach to supporting SME development across the region:
First, a conducive business environment, i.e. investment climate, is the foundation of IFC’s support for SMEs. The Doing Business Project (www.doingbusiness.org) highlights the impact of the World Bank Group’s investment climate work. Doing Business analyzes regulations that apply to an economy’s businesses during their life cycles, including start-up and operations, trading across borders, paying taxes, and closing a business.
By focusing on the regulatory problems that impact SMEs most (such as licensing, registration and taxation) IFC and its partners can create entry points for the other building blocks of the approach.
Second, limited management and operational capacity further slow the performance and growth potential of SMEs. In response, IFC helps provide SMEs with affordable access to localized and customized business management information, interactive tools, and training. In partnership with development agencies and the private sector, IFC is rolling-out capacity building products, Business Edge and SME Toolkit, to enhance SME competitiveness. Business Edge and SME Toolkit provide SMEs with the tools and skills they need to become better suppliers, distributors, clients, etc.
|The number of reforms in Africa since DB2006 has increased by 400% steadily rising from 16 reforms in DB2006 to 67 reforms in DB2010. For the first time a Sub-Saharan African economy, Rwanda, was the world’s top reformer of business regulation in 2009, making it easier to start businesses, register property, protect investors, trade across borders, and access credit.|
IFC has found that development results are improved when capacity building is linked to SME access to markets and access to finance. IFC has developed several programs that create linkages between SMEs and large businesses. These linkages create powerful incentives for SMEs to build managerial and operational capacity within their own operations. By accessing new markets more effectively, SMEs create opportunities for long-term financial sustainability which can lead to increased job creation.
Access to finance, a serious challenge for many SMEs, is the final building block of IFC’s approach. IFC has developed several single and multi-country programs in collaboration with local financial intermediaries that enable SMEs to grow their businesses with affordable and tailored credit and investment. For example, by enabling banks to provide products and services to the untapped SME segment, the Africa MSME Program has provided thousands of SMEs in 14 countries with opportunities to fund and grow their businesses.
By bringing these four solutions together in a coordinated fashion, IFC is playing an important role in enhancing SME competitiveness across Africa.