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95% of MSMEs in Africa don’t have access to loan – Report

By on August 14, 2015

A recent report that focused on micro, small and medium-sized enterprises (MSMEs) across Africa, has revealed that more than 95 per cent of MSMEs, operate with personal cash, which is untraceable, costly to handle and unsafe.
Operating with personal limited cash, means that the entrepreneurs do not meet most of the lending criteria, and as a result, are declined credit facilities at banks.
The report, which blamed the situation on lack of proper business model, said entrepreneurs’ business plans lack a crucial component, a payment strategy that leverages existing technology.
“Interestingly, it is estimated that only 22 per cent of enterprises in sub-Saharan Africa have a loan or a line of credit.  This lack of access to a formal payment infrastructure limits the businesses growth because of the lack of insight into the owner’s track record,” the report revealed.
Rather than limit the scope and scale of one’s business to customers who are able to transact with a certain amount of cash at a time, electronic payments taps into the power of the Internet to extend the geographical scope of clients who can transact digitally, from any part of the Africa and the world, the report added.
Two of the solutions that are currently being rolled out across Africa to help MSMEs are the MasterCard Payment Gateway Service (MPGS) and mobile point-of-sale (MPOS). The secure and robust Internet payment solution and affordable MPOS devices help entrepreneurs accept payments on their website from cardholders around the world and physically in remote locations. Not to mention the fact that these merchants can capitalise on local business opportunities that previously weren’t fully explored.
It was observed that during the recent engagement with entrepreneurs at the Global Entrepreneur Summit (GES) in Nairobi, Kenya, which President Barak Obama of the United States attended, there were inspiring stories of true innovation, coupled with the ambition of ‘doing good’.  A young female entrepreneur, who is a national of the Republic of Benin, developed a scalable solution to help curb the impact of child malnutrition with a highly nutritious biscuit.  Her dream is to roll-out the initiative by targeting displaced communities due to unrests, famine, among others.
Additionally she will need to be able to have a smart digital payment solution to pay suppliers across the continent in various currencies.
Although she has a laudable project, she is faced with the challenge of access to fund as well as a trusted payment solution system, which the MasterCard offers.
According to MasterCard Executive, Daniel Monehin, “The MasterCard Lab for Financial Inclusion in Kenya will help create further opportunities to engage with entrepreneurs on a daily basis, something I am personally looking forward to be part of.”
The first GES to take place in sub-Saharan Africa, created a platform for entrepreneurs at all stages of business development to connect with business leaders, mentors and influential government officials from around the globe.
“Personally, GES left me inspired because in many ways it was a celebration of innovation and resourcefulness, and thanks to President Obama’s attendance, which drew much-needed attention to topics like youth unemployment, poverty and access to education. I engaged with young entrepreneurs who are passionate to make a difference in their chosen fields,” Monehin said.

 

[ThisDay]