SPECIAL REPORT: At SAM, Calls for Alternatives to Collateral, Acquiring Insurance, Technical Assistance, Cheaper Loans for SMEs

During SAM Conference 2017, Addis Ababa, Ethiopiathe SAM (Semaine Africaine de la Microfinance) conference today, Willie Mzumala of Malawi’s Tapika Food Products described how he has grown his business over 13 years to employ 9 people year-round plus additional seasonal staff. However, he still is offered loans at interest rates as high as 45 percent. In addition to affordable financing, he sees a need for small and medium-sized enterprises (SMEs) to get help with marketing, getting international exposure and standardizing quality.

Richard Muteti of the Kenya National Federation of Jua Kali Associations repeated Mr Mzumala’s call for help with standardization and more affordable financing. Among other barriers to SME success, he cited lack of appropriately designed credit products; high transaction costs charged by microfinance institutions (MFIs); lack of insurance options; limited management skills; and problems with patents, production quality, land title and taxes. Mr Muteti called for less reliance on collateral, for example by using credit rating services such as Metropol. He also suggested lenders prioritize balancing their disbursals in terms of gender and age.

Wairimu Muthike of ACRE Africa described partnering with firms such as UAP Insurance to deliver insurance products to farmers. Among the advantages of acquiring such coverage, she cited the possibility of lenders accepting insurance as collateral for agricultural loans.

Khatarine Pulvermacher of the Microinsurance Network discussed the benefits of lenders supporting small firms in covering risks such as damage to stock, equipment and real estate. This helps the lender by reducing the likelihood of default. In fact, one lender in Ghana is experimenting with directly insuring the earning power of its borrowers. Such policies can reimburse the lender if a borrower cannot repay his or her loan due to an inability to work, such as because of illness.

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
http://www.microfinance-africa.org/en/SAM

Coverage of the 2017 SAM in Addis Ababa and the 2015 SAM in Dakar by MicroCapital
https://www.microcapital.org/category/semaine-africaine-de-la-microfinance-sam/