Africa’s SMEs have little access to finance, which thus hampers their emergence and eventual growth. Their main sources of capital are their retained earnings and informal savings and loan associations (tontines), which are unpredictable, not very secure and have little scope for risk sharing because of their regional or sectoral focus. Access to formal finance is poor because of the high risk of default among SMEs and due to inadequate financial facilities.
Small business in Africa can rarely meet the conditions set by financial institutions, which see SMEs as a risk because of poor guarantees and lack of information about their ability to repay loans. The financial system in most of Africa is under-developed however and so provides few financial instruments. Capital markets are in their infancy, shareholding is rare and no long-term financing is available for SMEs. Non-bank financial intermediaries, such as microcredit institutions, could be a big help in lending money to the smallest SMEs but they do not have the resources to follow up their customers when they expand.
Financing SMEs in Africa by Céline Kauffmann Policy Insights No. 7 is derived from the African Economic Outlook 2004/2005, a joint publication of the African Development Bank and the OECD Development Centre
To learn more about this author, visit OECD Development Centre's Website.
Like this article? Share it with your friends
|
|
OECD Development Centre
(Visit OECD's Website)
Created in 1962 by the Organisation for
Economic Co-operation and Development
(OECD) in Paris, the Development Centre is
an interface between OECD Member countries
and the emerging and developing
economies.
The Development Centre occupies a unique
place within the OECD and in the
international community. It is a forum
where countries come to share their
experience of economic and social
development policies. The Centre
contributes expert analysis to the
development policy debate. The objective
is to help decision makers find policy
solutions to stimulate growth and improve
living conditions in developing and
emerging economies.
|
|
|
OECD Development Centre's
Complete
List Of
African-Accounts
Articles
|
|
If you enjoyed this article, get OECD Development Centre's Complete List of African-Accounts Articles For FREE!
|
|
|
|
![[Get Copyright Permissions]](http://license.icopyright.net/images/icopy-w.gif){kind=small}
