Small and medium-sized businesses form the majority of enterprises across the globe, according to the World Bank. 

MSMEs (micro, small, and medium enterprises) in Africa have struggled to get credit in the past. However, following the fintech transformation, lending is now possible. Recent estimations from the IFC (International Finance Corporation) suggested that the finance difference for SMEs (small and medium enterprises) in Africa is $331 billion. 

MSMEs are the foundation of the economy in different African countries. Investing in this industry adds up to 38% of the GDP in sub-Saharan Africa. Still, 51% of the entire 44 million formal MSMEs across the continent lack sufficient finance to scale.

Lack of Liquidity a Major Bottleneck

Governments within the African continent have classified poor liquidity as the greatest bottleneck in the business industry. Private enterprises are adopting advanced financial services to seal the gap. 

Technology-enabled finance and digital solutions are becoming popular, and the MSME industry has not been left behind. During the IFC-supported small and medium-sized enterprises finance forum in Kenya, Karin Finkelston of IFC (International Finance Corporation) said, “We see significant improvements in access to finance in Africa, creating opportunities for small and medium enterprises that create jobs and reduce poverty. We should celebrate the gains while recognizing we have much more to do. Digital finance is the future, so we must expand and tailor products and services to meet the growing needs of a dynamic continent.”

Many SMEs struggle with Lack of Access to Financing 

Lacking access to financing is another obstacle that SMEs struggle with, especially those seeking to scale their operations in developing countries and emerging markets. The IFC says that Large firms can access bank loans easier than is the case with SMEs.  

Estimations from the global firm suggest that 65 million companies or 40% of formal MSMEs in developing countries have unfulfilled financial needs annually. This inadequacy totals $5.2 trillion, or 1.4 times the present level of global MSMEs lending.  

Founder and CEO of Lidya, a digital SME platform specializing in lending, Tunde Kehinde, tells Ignatius Annor of Business Africa that, “Increasingly, there are agency networks, you see fintech booming. And we also want to play our role because what we’ve said is that just using pure data at Lidya; we can access you for a facility, then next day give you a loan.’’ 

Saving the MSMEs

Digital and technology financial service providers can offer payment and financing services to the MSMEs to drive growth. Various fintech players, like supply and payment chain finance platforms, and marketplace lenders, can play a role in closing the credit gap by partnering with large or conventional financial organizations. They can also launch their financing institutions to aid the MSMEs. 

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