AfDB calls for increase in lending to MSMEs
The African Development Bank (AfDB) has called on financial markets to increase affordable loans and provide more diverse and innovative financing instruments to Africa’s micro, small and medium sized enterprises.
The Bank maintained that Credit providers need to increase their lending by at least US $135 billion in order to meet demand by African Micro, Small and Medium-sized Enterprises (MSMEs).
In a statement to mark the United Nations’ MSMEs Day, AfDB noted that firms with fewer than 20 employees and less than five years’ experience provide the most jobs in Africa’s formal sector.
The President, AfDB, Akinwunmi Adesina, was quoted as saying that the entrepreneurial culture is vibrant with about 80 per cent of Africans view entrepreneurship as a good career opportunity, adding that the continent has the highest share in the world of adults starting or running new businesses, but often in sectors where productivity remains low.
He said: “new industrialisation strategies should focus on leveraging this dynamism and targeting the continent’s fast-growing private enterprises which have potential to create quality jobs.”
According to the UN, MSMEs represent around 90 per cent of global economic activity, and are on the front line of embracing transformative technologies and new business models.
The statement said in 2016, the Bank provided financial services to 156,000 individual owner-operators and MSMEs through financial intermediaries addressing a key constraint to starting up and growing businesses.
It noted that a holistic policy approach is needed to strengthen entrepreneurship for Africa’s industrialisation, and tackle the multitude of constraints.
“The first is improving skills of entrepreneurs and of workers in general and aligning them with labour market needs. While governments can promote learning, engaging the private sector is necessary. The second policy area relates to grouping firms in business clusters, such as industrial parks and special economic zones. Clustering can support start-ups and increase existing firms’ productivity and growth, assuming adequate infrastructure is available,” It noted.
The statement noted that MSMEs are vital in achieving the Sustainable Development Goals (SDGs), in particular in promoting innovation, creativity and decent work for all.
However, it noted that better policies are required to help MSMEs increase productivity and income via microfinance programmes and education in Africa, which also needs to validate skills acquired in the informal sector through certification.
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