AfDB Inaugural Thought Leadership Seminar On Boosting Msmes in Africa

10 March 2011
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African Development Bank (Abidjan)
press release

The Chief Economist and Vice-president, Mthuli Ncube, on Wednesday, 9 March 2011, launched the Bank's inaugural Thought Leadership Seminar on one of the most critical challenges for accelerating African development: "boosting the growth of MSMEs (micro, small and medium enterprises). This initiative is part of the Bank's knowledge-sharing program and opens a path for innovative thinking.

The major contribution of MSMEs to economic development was addressed by three experts from Mc Kinsey: Edoardo Ginevra , Marc Beaujean and Tony Goland. They highlighted the main barriers and possible intervention areas by financing institutions in this crucial sector of the African informal and formal economy.

In Africa, 60 million MSMEs, mainly informal, represent potential revenues of USD 20 billion, important social benefit and value creation. However, many financial and non- financial barriers still hinder this sector's development. The financing barriers are threefold: limited access to bank financing; insufficient equity financing and lack of appropriate insurance coverage. Therefore, the sector's credit gap is as huge as USD 400 billion for MSMEs on the continent. The non-financial sector barriers are fourfold: heavy regulatory and legal framework, lack of infrastructure, corruption and tax systems. Removing financial barriers, creating a more supportive enabling environment for financing and providing direct public sector support are possible intervention areas to tap into the potential of the MSMEs sector.

In order to boost the sector's growth, four concrete programs were discussed:

Establishment of credit bureau;

Setting up a risk-sharing facility

Creation of special economic zones,

And up-scaling microfinance institutions.

The seminar provided an opportunity to analyze and address the relevance of these four possible interventions for the AfDB and its role as the leading development finance institution in Africa for MSMEs. Mr. Ncube stressed the Bank's need "to evaluate precisely the financing gap of MSMEs to be able to better address their financial constraints by designing innovative instruments."

Contacts

Pénélope Pontet

Read the original article on African Development Bank (AfDB).

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