An international group of 20 development finance institutions that came together in 2020, today announced commitments of over USD 5.55 billion of financing to small and medium size enterprises (MSMEs) in Africa.
The coalition said it had exceeded its initial target by 40 percent, while DFIs jointly committed over USD 5.55 billion of financing of MSMEs in Africa over the period.
At the first Finance in Common Summit in November 2020, the EDFI Association, on behalf of its 15 European member development finance institutions (DFIs), together with the African Development Bank (AfDB), the West African Development Bank (BOAD), FinDev Canada, the U.S. International Development Finance Corporation (US DFC), and the Islamic Corporation for the Development of the Private Sector (ICD), launched the coalition.
The Trade and Development Bank (TDB) joined it soon after.
In response to the unprecedented global health and economic crisis caused by Covid-19, the coalition recognised the critical role DFI’s play in supporting the crisis response in vulnerable countries.
While MSMEs are the economic lifeblood of emerging and frontier economies, they are also more vulnerable to crises than larger enterprises.
In developing countries, formal SMEs contribute to more than one third of gross domestic product and account for 52% of formal employment.
Improved access to finance for MSMEs is critically important to boost growth and the prospects of the 450 million young Africans projected to join the labour market by 2050.
The Covid-19 crisis put the viability of MSMEs under acute pressure and efforts to expand inclusive financial solutions are crucial for a successful recovery.
To address this challenge, the coalition’s signatories committed to: deepen cooperation among their institutions; focus on inclusive financial solutions for the private sector; and support clients with technical assistance and advisory services when needed.
Consequently, the 1,400 projects contracted demonstrate a strong focus on smaller and inclusive projects as well as on a broad spectrum of SMEs, from small enterprises/start-ups to mid-sized firms with strong growth potential.
In addition, signatories mobilised EUR23 million of technical assistance, including capacity building and advisory services to MSMEs.
African Development Bank President Akinwumi Adesina said: “Micro, small, and medium-sized enterprises are vital to Africa’s prosperity, representing 90% of all businesses and generating more than half of all jobs. I am confident our initiative will make a major contribution to the success of micro, small, and medium-sized enterprises all over Africa. If they grow, we all do.”
“MSMEs are vital to Sub-Saharan Africa’s economy, representing 90% of trade and more than half the jobs in the region. Surpassing our initial goal further motivates us to collaborate with our partners to promote sustainable and inclusive economic growth in Sub-Saharan Africa,” added Lori Kerr, CEO, FinDev Canada.
Ayman Sejiny, CEO of ICD, commented: “I would like to congratulate all the coalition partners and ICD’s team for exceeding the coalition’s target by committing over USD 5 billion for MSME financing in Africa.”
“The impressive results of this coalition demonstrate the kind of collaboration between DFIs that is needed to support Africa’s private sector enterprises. European DFIs increased SME financing to a record level in 2021.,” concluded Søren Peter Andreasen, CEO of EDFI.
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