Access to finance for Africa’s MSMEs should be a priority to enable them to play their role as primary drivers of the continent’s future economic development and employment creation, Jean-Louis Ekra, Former President of the African Export-Import Bank (Afreximbank), said.
In a lead presentation ahead of a panel discussion on the role of DFIs and Eximbanks at the 29th Afreximbank Annual Meetings (AAM2022) in Egypt’s New Administrative Capital, Mr. Ekra said that MSMEs needed finance to set up, to buy their productive and operational assets, to pay for wages, supplies and bills, and to have sufficient working capital and finance for trade.
In the discussion, the panelists recommended that support to Africa’s MSMEs should include:
- Approval of new products, such as factoring, by regulators as they could unlock working capital for the MSMEs. Exims, such as the Indian Exim, Afreximbank and Nigerian Export-Import Bank (Nexim), were helping to widen its access working with regulators
- The Central Bank of Egypt, which was developing an Export Credit Agency to help exporters access credit, should work with Nexim on areas of due diligence so that exporters and importers from both countries could collaborate more closely and therefore increase business ties
- Eximbanks and DFIs should play advocacy and advisory roles to create the right environment to support industry and integrate them within local value chains
- While the cost of capital was an issue, it was not a concern since there were many other solutions that could be tapped to blend finance. Afreximbank had created a central bank deposit facility so that domestic reserves could be used to develop new solutions, including those related to MSMEs
- Development Financial Institutions should continue to extend lines of credit to commercial banks for onward funding to Africa’s small and medium-sized businesses. They should also continue sharing or passing on the risk to the commercial banks, enabling DFIs to support MSMEs in countries where they had no local presence. In addition, Eximbanks should facilitate the allocation of risk as an intermediate between the DFIs and commercial banks.