SPECIAL REPORT: Public Solutions at SAM: Collateral Registries, Business Training, Higher Microinsurance Uptake Can Promote Entrepreneurship in Africa

At SAM Conference 2017, Addis Ababa, Ethiopiathe SAM (Semaine Africaine de la Microfinance) plenary on “Public Solutions to Promote Entrepreneurship in Africa,” Kennedy Komba of the Alliance for Financial Inclusion (AFI) explained that his institution’s SME (Small and Medium-sized Enterprise) Working Group comprises 53 regulatory and policy-making bodies. To facilitate the growth of entrepreneurship, these agencies have created collateral registries, adjusted lender liquidity ratios, updated know-your-customer frameworks and established rules for digital financial services. Trainers in Zambia used a financial education game to reach 5,000 people, of whom 80 percent were able to improve their businesses as a result. In Ghana, the Ministry of Agriculture and the Bank of Ghana collaborated to boost local value chains in an effort to reduce costly food imports. The program included risk sharing to increase lending to farmers, encouraging insurance uptake, improving financial institution rating systems and integrating smaller farms into value chains.

Millison Narh of the African Rural and Agricultural Credit Association argued that agribusiness “has huge potential to create jobs and increase incomes.” While the sector has the potential to grow four-fold, he said it requires additional investment on the order of USD 400 billion. As progress, Mr Narh cited the national entrepreneurship strategy launched this month in Ethiopia as well as an “enabling environment” strategy in Ghana that was supported by the US government. This effort includes aligning the work of the four Ghanaian financial regulators to develop financial infrastructure and attempt to reduce lending rates.

Maimouna Gueye of the African Development Bank (AfDB) agreed that interest rates are too high and added that loan terms are too short to meet the needs of growing enterprises. She also argued in favor of AfDB’s practice of nudging lenders to provide technical assistance along with loans.

Ibrahima Keita of Kafo Jiginew said that, from the perspective of his microfinance institution (MFI), “the realities on the ground are different, in that resource mobilization is the holy grail.” He continued, “It is essential that eligibility be softened to help MFIs get more funds.”

Nigeria’s goals include job creation, food security, reduced imports, a single-digit inflation rate and a stable exchange rate, according to Olukayode Oluwole of the Central Bank of Nigeria. He described the recent establishment of a national collateral registry for movable assets, such as photographic or construction equipment, as a means to increase the flow of credit to SMEs, which now stands at just 0.2 percent of total lending. So far, commercial banks and MFIs have registered 17,000 assets valued at USD 20 million. In addition, a new system offers customers a uniform identification number that can facilitate their dealings with each financial institution they patronize.

AfDB’s Enable Youth program provides young Nigerians with funding and coaching to help them make a living in agriculture. Entrepreneurship Development Centers in the country also offer four-week training sessions on business skills such as writing proposals for graduates of technical schools. Those with only a high-school diploma attend an additional two weeks of training.

Rachael Mushosho of the Reserve Bank of Zimbabwe also spoke of the importance of boosting business skills. In targeting youth and women, her organization has been convening private and public organizations – including universities and agricultural groups – to align strategies. To maximize practicality, representatives of private organizations head each subcommittee. Accomplishments to date include a funding facility specifically for people with disabilities; the establishment of a credit reference bureau used by banks, MFIs and utility companies; the passage of a law for a collateral registry, which is now in its implementation phase; and a credit guarantee scheme to encourage lenders to expand the range of clientele they serve. On the ground in Zimbabwe, the Indian government is supporting microenterprise incubators, and the Zimbabwean government has set up rural information centers offering education on financial products. In addition, a UN partnership has helped people in areas of drought access funding and training. In summary, Ms Mushosho said we must focus on the ease of doing business as we seek to “develop a sustainable ecosystem for SMEs.”

Among the other panelists taking a broader view of entrepreneurship, Mr Keita argued that we can reduce armed conflict by reducing poverty and despair though business success.

This feature is part of a sponsored series on the third SAM, which took place from October 9 to October 13 in Addis Ababa. It is organized by ADA, an NGO based in Luxembourg, with the support of Luxembourg’s Ministry for Development Cooperation and Humanitarian Affairs, in partnership with Microfinance African Institutions Network (MAIN), African Rural and Agricultural Credit Association (AFRACA), African Microfinance Transparency (AMT), the Association of Ethiopian Microfinance Institutions (AEMFI) and Kenya’s Association for Micro-finance Institutions. MicroCapital was engaged to report on-site from the event.

Sources and Additional Resources

2017 SAM Conference

Coverage of the 2017 SAM in Addis Ababa and the 2015 SAM in Dakar by MicroCapital

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