SMEs in Africa: three priorities for more inclusive growth

Din recent years, the development of African SMEs has become a leading topic and, today, it is at the heart of concerns with the economic crisis that accompanies the Covid-19 pandemic. Indeed, SMEs constitute the heart of the African economic fabric, representing nearly 90% of businesses and the vast majority of jobs. Because they respond to essential daily needs such as those as diverse as housing, food or healthcare, these companies position themselves as creators of solutions for social and societal issues.

Nevertheless, too many projects stagnate or fail because of an ecosystem that is still too unfavorable, particularly failing in the multidimensional support of SMEs over the long term. Beyond declarations of intent, it is now time to implement three priorities to make SMEs the engines of more inclusive growth.

Decentralize and innovate in financing

To meet the financing needs of SMEs, it is important to take into account the socio-economic nature of SMEs, many of which operate in the informal sector. Traditional banks, due to their organization, cannot be suitable interlocutors for these companies, unlike decentralized financial systems (DFS) which include micro or mesofinance institutions. This is why supporting SFDs – which represent 15 million customers in the UEMOA zone – within the framework of economic recovery plans makes sense to revive the real economy.

At the same time, financial institutions must adapt their offers to offer financing solutions tailored to the needs of entrepreneurs. Beyond loans, other financing mechanisms can be put in place, such as financial leasing, factoring, sale with repurchase or even the reverse factoring. By diversifying financing channels, financial institutions increase the possibilities for entrepreneurs to create the conditions for the growth of their business.

Strengthen support for entrepreneurs

While access to financing remains a major problem, another obstacle very often remains: first and foremost, SMEs seeking financing must be structured with a good organizational system and entrepreneurs with adequate capacity to administer it properly. Without this first successful step of building financing files bankableit is impossible to envisage seeing his entrepreneurial project taken seriously by financial institutions.

Support on the technical side is therefore just as important as that on the financial side. The training of entrepreneurs, the provision of expertise and advice on accounting, HR, digital are all points not to be overlooked to allow an SME to project itself.

Encourage female entrepreneurship

According to a study by Roland Berger, the African continent has the world leadership in female entrepreneurship with no less than 24% of female entrepreneurs, compared to 9% in the Middle East or 6% in Europe and Central Asia. Obviously, these figures are to be taken with caution insofar as, if some make it a lifestyle choice, others see it only as a survival option. Nevertheless, they contribute more than ever to the economic development of the continent, while operating in an environment that is more unfavorable to women than to men. Indeed, businesses owned by women have on average fewer employees, less revenue and profits and lower productivity.

To unleash this immense, under-exploited potential, public institutions and financial establishments need to set up dedicated programs, particularly in the area of ​​training, insofar as inequalities in training and qualifications still penalize women too much.

According to our common experiences with African SMEs in different countries, these three axes are essential to allow our entrepreneurial ecosystem to fully flourish and contribute to ever more sustainable economic development. This is obviously accompanied by ambitious public policies, particularly in terms of regulations favorable to SMEs and the establishment of attractive business climates.