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Five Highlights from the Africa SME Finance Forum: Day 1

Five Highlights from the Africa SME Finance Forum: Day 1

Through the first Africa SME Finance Forum, IFC, financial institutions and entrepreneurs are seeking to find solutions to close the $331 billion SME finance gap across the continent. The conference on May 15-16 explores local and global best practice SME banking solutions to harness digital technology, e-commerce and blockchain, to promote youth entrepreneurship and new SME banking models. Here are five highlights from Day 1 of the event.

  1. We need to reverse the high SME attrition rate with innovative solutions, said Central Bank of Kenya Governor Dr. Patrick Njoroge as he opened the event. “46% of SMEs in Kenya close within a year of founding, and another 15% in the year after that. Research shows that part of the issue is that these SMEs do not solve a big enough problem,” the Governor told an audience of 350 people from 170 institutions and more than 50 countries. He called for SMEs to remain innovative and for financial institutions to create an accessible and supportive ecosystem.
  2. The intersection of digital services and SME banking is creating new ways to help small businesses access finance, said Aliou Maiga, IFC’s Regional Head for the Financial Institutions Group in Sub-Saharan Africa. Maiga said SMEs are at the heart of economic activity, job creation and thus development and IFC is working with bank, telecom and fintech partners to improve access to capital. More information on IFC’s work with SMEs can be found here: www.ifc.org/smefinance.
  3. Don’t be afraid to invest big to support entrepreneurs, said Grant Brooke, co-founder and CEO of Twigafood, a mobile-based supply platform in Kenya. Brooke noted that capital structures in Africa are geared towards profitable companies or trade finance, not small business. That limits the continent’s ability to build its own unicorns, its multibillion start-ups.
  4. Both banks and entrepreneurs need to change their mindset to create a strong SME environment, said Philip M. Sigwart, Director of SME Banking at Equity Group Holdings (Kenya). “Financial service providers tend to stick to certain habits…the general perception among banks is that it’s risky to provide finance to small businesses. Especially when SMEs don’t have collateral. We need a change of mindset from the banks, and from entrepreneurs to understand the need to formalize a bit more rapidly,” Sigwart said.
  5. Blockchain and artificial intelligence still has room to grow: Technology is developing but it will take a lot more data to fully develop products that work for banks and the SME market. Banks don't have the same customer and data set size as a Google, for example, and therefore AI innovation will be different, says Pau Velando, General Manager of Strands Finance. What we will see more likely is a hybrid of analytics and machine learning.