The coalition for a sustainable and inclusive recovery of the private sector – an international group of 20 development finance institutions that came together in 2020 – has announced commitments of over US$5.55 billion of financing to micro, small and medium enterprises (MSMEs) in Africa between mid-2020 and end of 2021, beating their set target of $4 billion over the period.
The coalition said it had exceeded its initial target by 40%, while development finance institutions jointly committed over $5.55 billion of financing of micro, small and medium enterprises in Africa over the period.
In response to the unprecedented global health and economic crisis caused by COVID-19, the coalition recognised the critical role development finance institutions play in supporting the crisis response in vulnerable countries.
While micro, small and medium enterprises are the economic lifeblood of emerging and frontier economies, they are also more vulnerable to crises than larger enterprises. In developing countries, formal small and medium enterprises contribute more than one-third of gross domestic product and account for 52% of formal employment.
Improved access to finance for micro, small and medium enterprises is critically important to boost growth and the prospects of the 450 million young Africans projected to join the labour market by 2050. The COVID-19 crisis put the viability of micro, small and medium enterprises under acute pressure and efforts to expand inclusive financial solutions are crucial for a successful recovery.
To address this challenge, the coalition’s signatories committed to:
- Deepen cooperation among their institutions
- Docus on inclusive financial solutions for the private sector
- Support clients with technical assistance and advisory services when needed
Consequently, the 1,400 projects contracted demonstrate a strong focus on smaller and inclusive projects as well as on a broad spectrum of small and medium enterprises, from small enterprises/start-ups to mid-sized firms with strong growth potential. In addition, signatories mobilised €23 million of technical assistance, including capacity building and advisory services to MSMEs.
“MSMEs are vital to Sub-Saharan Africa’s economy, representing 90% of trade and more than half the jobs in the region,” said Lori Kerr, CEO, FinDev Canada. “As these businesses disproportionately suffered the impacts of the health crisis, we joined efforts to provide capital and advisory services to support the economic recovery. Surpassing our initial goal further motivates us to collaborate with our partners to promote sustainable and inclusive economic growth in Sub-Saharan Africa.”Click below to share this article