By Sallieu S. Kanu
The African SME Finance and Investment Network (ASFIN) will convene stakeholders across the country for a one-day finance and investment summit on August 31, 2023, at the Radisson Blu Hotel in Freetown. The aim of this summit is to address some of the major challenges that SMEs face in accessing finance.
Peter SaSellu, President and CEO of ASFIN, says, “In emerging markets, most formal jobs are generated by SMEs, which create 7 out of 10 jobs.” He notes that access to finance presents a significant hurdle to SME growth. It stands as the second most frequently cited obstacle that SMEs encounter when attempting to expand their businesses in emerging markets and developing countries, particularly in Africa.
Small and Medium Enterprises (SMEs) face greater difficulty in securing bank loans compared to large firms. Instead, they often rely on internal funds or contributions from friends and family to initiate and initially operate their ventures. The International Finance Corporation (IFC) estimates that 65 million firms, constituting 40% of formal micro, small, and medium enterprises (MSMEs) in developing nations, face an unmet financing requirement of US$5.2 trillion annually. This figure is equivalent to 1.4 times the current global MSME lending volume. Roughly half of formal SMEs lack access to formal credit, and this financing gap expands further when considering micro and informal enterprises.
The Summit Coordinator, Ashma Jalloh, emphasizes the timeliness of the Sierra Leone SME Finance and Investment event. She explains that the summit’s objective is to center discussions around adequate funding, access to finance, and financial inclusion. These deliberations intend to address issues such as modern technology provision and low managerial skills.
Jalloh elaborates, “The SME Finance and Investment Summit will examine SME financing in Sierra Leone and explore various financing options available to SMEs. This includes scrutinizing debt financing, wherein the roles of commercial and microfinance banks, alongside other financial institutions and investors, in supporting SME financing within the country will be assessed. Additionally, the role of equity financing through venture capital and business angel financing will be explored. The aim is to ensure sufficient funding for SMEs in Sierra Leone.”
Recca Paulson, the Executive Director of ASPIN, underscores the significant role that SMEs play in economies, particularly in developing nations. SMEs constitute the majority of businesses worldwide and contribute significantly to job creation and global economic growth. These enterprises make up approximately 90% of businesses and over 50% of global employment. In emerging economies, formal SMEs contribute up to 40% of the national income (GDP). These figures are notably higher when accounting for informal SMEs. World Bank estimates suggest that by 2030, 600 million jobs will be required to accommodate the expanding global workforce, underscoring the elevated importance of SME development for numerous governments worldwide.