SMEs FINANCING IN SUB-SAHARAN AFRICA.

Sub-Saharan Africa seems to be the most injured region of the world for access to finance for SMEs, evidenced by the following elements against:

World region	Get credit	Register property	Investor protection	Contract compliance
Sub-Saharan Africa	114	127	113	122
Africa Latin and Caribbean	64	93	83	108
Central Asia	107	73	111	70
East Asia and Pacific	65	70	61	71
South Asia	77	89	74	121
Central and Eastern Europe	42	67	70	54
Middle East and North Africa	113	77	93	113
OECD	37	53	61	36

Source : Doing Business (www.doingbusiness.org),World Bank, 2009

 Throughout this article, we will study the causes, consequences and solutions of this phenomenon.

 90% of SMEs in SSA are in the informal sector. They are, therefore, unable to provide bankers documents necessary for financing such as financial statements, addresses and other ... Who are essential criteria for the competition to bank credit.

Most SMEs promoters, are developing their businesses without any Preconditions studies (business plan, analysis of the environment ...) .This has the effect, lead to a lack of strategy in the short, medium and long term in the company's manager. And in addition, increases the risk aversion of bankers on the financing of SMEs.

The financial crisis of late 2007 and early 2008, is also considered one of the major factors in the decline of SME financing in SSA: the most local banks are subsidiaries of large foreign banks, these are found in the obligation to repatriate their funds to their parent companies based mostly in Europe and the US during the financial crisis of late 2007 and early 2008.

 Which once again, lead to a closing of valves credit for SME financing in SSA. Whereas during the years 2000 to 2007, subsidiaries of large local banks were beginning to have an appetite for increasingly growing towards Sub-Saharan African SMEs. Because, after this period sub-Saharan Africa was becoming one of the few areas of the world with a stable growth of around 7-8% in a decade (the highest rate of return on private capital in the world).

 Geographical and cultural distance between subsidiaries of major foreign banks based in SSA and local entrepreneurs also seems to be one of the major factors in the lack of SME financing in SSA: subsidiaries of major foreign banks in Africa Saharan do not always understand the environment in which they operate.

 Other shares, the eligibility criteria for bank credit offered by the banks appear to be inaccessible to local SME bosses. And even for companies with a turnover enough and therefore already has a special relationship with the banks.

Securing credit is also considered one of the strongest links in the brake SME financing in SSA: we take for example the case of collateral such as land that are commonly used in this region of the world: The liquidation mechanisms of the past appear too complex, lengthy and costly in the eyes of bankers. Preferring once again, do not accept them as collateral.

 Even so, bankers agree to finance SMEs; the latter complain of not winning enough in terms of return on investment. And a major risk for non repayment of said loans. The risk is very high in terms of the contribution Saharan Africa banks to finance for SMEs.

Credit and banking products offered by local banks often prove inadequate facing the local environment that is subject to specific rules. Sub-Saharan African banks usually offer loans at very low rates of maturity to local entrepreneurs. While they have long-term financing needed to feed their investment.

We must also note that after the economic crisis in Sub-Saharan Africa suffers the late 70s and early 80s, the priorities of the states were the establishment of stimulus policies of the economy. This has led to a diversion of bank financing of SMEs turning to slow; to a concentration towards the debt financing of the states that appeared safer at that time and still.In other words, we can say that because of the economic crisis of the late 70s and early 80s, banks have lost the habit of finance SMEs.

Tax and other pressures from the various Sub-Saharan Africa governments also appear to be one of the main causes in the lack of SME financing in SSA. For local SMEs prefer to remain in the informal sector.Because of  fear of :fiscal pressures, social and other, exerted on them by the latter.

All these causes, are intended to cause a slowdown in the economies of Sub-Saharan African states and weaken. Because, essentially based on the export of raw materials. And not on a tissue strong SMEs and a strong consumption. This also leads to an increase in poverty because, beyond creating wealth, SMEs are also hiring engines.

Creating specialized units of credit in financing SMEs in local banks appears as one of the major solutions in access to finance for SMEs in Sub Saharan Africa. For, beyond provide financing to developers of local SMEs, also would study their financing applications case by case. And also would provide advice to the latter, for the management of resources that have been allocated.

The multiplication of intermediaries between bankers and entrepreneurs, also appears as one of the main pillars in improving relations between bankers and entrepreneurs in Sub-Saharan Africa. This, would be a risk sharing between local institutions with better knowledge of the SME financing market in SSA (NGOs, associations, microfinance institutions and others ...) and local banks. This method has been proven, especially in Ghana with the partnership between the Bank Of Ghana and associations of SUSU COLLECTORS.

The creation of business incubators in the different states of sub-Saharan Africa would enable our contractors to properly mature their business projects. And to identify any contours before putting them on the market. Which would lead to the emergence of a network of strong SMEs in SSA and competitive.

Improving the business climate in SSA is fundamental in the process of access to finance for SMEs in SSA. This aimed, to train attraction of FDI in SSA and better protect wearers financing for SMEs. For these quite often feel aggrieved during the legals disputes between them and  local SMEs promoters.


This regard,our modest contribution relative on SMEs financing in sub-saharan Africa.

Frédéric Betta-Akwa