Government asked to de-risk SMEs to enable them access funding
International credit institutions have advised the government to devise means of de-risking Small and Medium Enterprises (SMES) if commercial banks are to render them bankable.
Currently, financial institutions render SMEs un-bankable, meaning banks are not sure whether money extended to them will be paid back.
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The group chief executive officer Africa Guarantee Fund, Jules Ngankam told the Nile Post that it is the role of the development banks to ensure small and medium enterprises growth rather than commercial banks that focus on profit making.
"SMEs contribute 60-70% to GDP tone economies in Europe, America and much higher in Asia. This is not the same case in Africa," said Ngankam.
He made the remarks during the 7th edition of the Africa SME Champions Forum at Speke Resort Munyonyo under the theme: "Recovery and Growth"
The event, co-hosted by the Arab Bank for Development in Africa (BADEA) and empowered by AfricSearch, brought together over 300 of Africa’s top SMEs, institutional funding organizations, venture capitalists, angel investors and ecosystem builders.
Sidi Ould Tah, the managing director Arab Bank for Economic Development in Africa (BADEA) emphasized that it is important to work together and promote working solutions to SMEs.
"Only 20% of SMEs have access to finance due to perceived risks that SMEs may not meet their financial obligations and still some die in their first year of startup. We need to work hand in hand to promote SMEs and this must not stop at only giving them finance but also help them access information, research, access to markets and help them prepare their financial reports as required," he said.
Patricia Ojangole, the managing director of Uganda Development Bank (UDB) said they have put in place favourable programmes and requirements so that SMEs grow from small to medium, and medium to large.
"Our approach is to make sure that SMEs survive. We have put in place both financial and non-financial interventions across all value chains to support SMEs," she said.
She said SMEs play an important role in Africa’s economic development, adding that they provide 70% of jobs created, over 60% of the continent’s GDP and they are an engine for transformation and innovation.
"Over 8.5 million people are employed in this sector, and account for approximately 90% of the entire private sector, generating over 75% of the gross domestic product (GDP)," she said.
