On the second day of the SAM (Semaine Africaine de la Microfinance) conference, Godwin Ehigiamusoe of Nigeria’s LAPO discussed the needs and expectations of small and medium-sized enterprises (SMEs). He explained that they generally are sensitive to price and prefer not to post collateral. Loan sizing and duration are key. From a lender’s perspective, SMEs need to get their records out of their heads and onto paper (if not into digital form). The Central Bank of Nigeria has six Entrepreneurship Development Centers at which business owners can get assistance with business plans and other support.
Mr Ehigiamusoe explained that LAPO became involved with SME lending as its microenterprise clients grew. Likewise the staff of LAPO was in need of capacity development to serve their clients’ evolving needs. LAPO’s Sufen loan program is designed to identify female entrepreneurs with high growth potential and support their maturation.
Brian Kuwik of US-based Accion agreed that MFIs must build internal capacity because “it’s important to treat SMEs as a different business, with different policies and procedures as well as different products.” He described microenterprises as selling at higher margins in less volume, while SMEs have more volume but lower margins.
Regarding how investors can support MFIs in the process, Ahmed Laasri of Morocco’s Jaida Microfinance Fund said that his firm helps MFIs harness technology. Jarri Jung of the Netherlands’ Triple Jump cited the example of a risk-sharing facility his firm has provided to a financial institution in Liberia that is specifically targeted at furthering the institution’s outreach to SMEs.
Mr Jung also cited a study called “Closing the Gap” that found significant differences between markets in East and West Africa. In Kenya, SMEs are suffering primarily from a “lack of adequate financial solutions; in Togo, there is a lack of entrepreneurial mindset and lower level of professionalism.” Also in Togo, Mr Jung said, “SME policies and regulations still stifle SMEs and financiers.”
This feature is part of a sponsored series on the third SAM, which began on October 9 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 & Agricultural Credit Association (AFRACA), African Microfinance Transparency (AMT), the Association of Ethiopian Microfinance Institutions (AEMFI) and Kenya’s Association for Micro-finance Institutions. MicroCapital has been 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