Sub-Saharan Africa’s 40 million micro, small and medium-sized enterprises (SMEs) face a finance gap of $330bn, threatening their expansion, hiring, and operating capacity. Such companies account for 90% of businesses and 60% of jobs in Africa, yet 80% receive no bank financing, especially youth and women-owned firms. Many lack the financial acumen to prepare watertight financial statements or are put off by high interest rates, while others present strong default risks and are rejected by banks, a trend further exacerbated by the pandemic. Development finance associations and foreign investors are rallying to fill the gap, but what role can Africa’s own legacy banks and emerging fintechs play? What must happen to tear down the barriers to SME lending?
Key points
– Unpacking the risks and returns of SME finance amid COVID-19
– The evolution of credit scoring, predicting SME cashflows and digital lending journeys
– Creating SME lending success stories: The regulatory needs and capacity building
Sources: World Bank and Proparco
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