Financial access is the single biggest impediment to the growth and development of Small and Medium-sized enterprises (SMEs). This is despite the fact that these SMEs account for 90 percent of all businesses in Africa. This depicts that the investment potential of the African continent will only be unlocked by financing the SME sector.
In an attempt aimed at facilitating financing for small businesses in Africa, EU has committed USD 4.7 Mn.
The funds which will be disbursed by the International Finance Corporation will support local banks which in turn will provide financing to SMEs, young entrepreneurs and women in business. This is particularly in countries with ‘fragile’ economies or those with low income. It will focus on investments in agriculture, education and healthcare.
The programme is also expected to fund up to 50,000 women-owned small businesses and companies developing green energy options and create up to 200,000 jobs. The initiative aims to encourage banks to provide financial support for businesses, a move which the bank views as risky.
Ahead of signing the agreement Commissioner for International Cooperation and Development, Neven Mimica, said: “This new programme worth over €4 million will make a real difference for those who often struggle to access sources of financing for their business ideas: women, young entrepreneurs or small businesses in low-income countries. We expect to support some 50,000 small businesses and help to create up to 200,000 jobs. This technical assistance programme complements the EU guarantee under the European Investment Plan. This is a great example of how our External Investment Plan and our Africa-Europe Alliance for Sustainable Investment and Jobs work in practice.”
This technical assistance will complement EIP’s “Small Loans and Guarantee Programme (SLGP)” worth USD 47 Mn, which also aims to encourage local banks to lend to small companies.
This latest EU’s move will provide a sigh of relief for startups who normally have an uphill task getting their businesses financed. Startups need to be funded in order to survive because there are periods when profits are low and for them to survive, they need enough money to provide the necessary stability and ensure the business process is not disrupted.
Featured Image Courtesy: The African Exponent