Good practice: Smart Finance & Digital Banking, the AU’s answer to support African SMEs

Launched at the beginning of February by the African Union, the African Smart Finance and Digital Banking initiative is a support system for SMEs, women and young people. Three key levers to accelerate the continent’s economic growth.

Micro, small and medium-sized enterprises (MSMEs) are a vital part of African economies, accounting for more than 90% of all commercial companies and the vast majority of jobs on the continent. However, they often struggle to find the financing and support needed to develop their business. To remedy this situation, particularly by exploiting the possibilities of digital and economic intelligence, the African Union, in partnership with the AeTrade Group, has launched the « African Smart Finance and Digital Banking » initiative. 

A scheme to help African SMEs, women and youth achieve financial autonomy

Announced in early February, on the sidelines of the African Union summit, the scheme aims in particular to « help African SMEs, women and youth to achieve financial autonomy […] », says the statement of the pan-African institution, and this in particular by putting in place « a strategy that promotes a higher tolerance for risk and increased deployment of long-term financing. To do this, digital tools associated with banking procedures have been implemented as part of this initiative to provide loans in various African countries at a low interest rate, reducing the cost of financing, which in turn reduces risk. All this is done with a significant reduction in the loan cycle, from 3 months to 3 days. 

The new scheme is in line with the AU Commission’s SME strategy, initiated in 2017 to serve as a reference framework for AU member states. Following the operationalization of the pan-African e-commerce platform Sokokuu.Africa, the initiative thus seeks to present an integrated solution to boost job creation across the continent in this post-Covid era. Albert Muchanga, the African Union commissioner for economic development, trade, industry and mining, said the launch of the African Smart Finance and Digital Banking Initiative should be seen as « an integral part of the strategy to better rebuild the continent. 

Private sector, engine of economic growth

This strategy, according to the leader, will involve restarting the « engine of economic growth, which is the development of the private sector. For his part, Vincent Biruta, Minister of Foreign Affairs and International Cooperation of Rwanda – present for the signing of the agreement of the host country with the Ae Trade Group – congratulated the AU Commission and the AeTrade Group « for this important step in supporting SMEs and entrepreneurship in Africa. Haile Mariam Desalegn, the former Ethiopian prime minister (2012-2018) and chairman of the AeTrade Group, emphasized the initiative’s commitment to an inclusive approach, working closely with public and private sector partners to establish « a jobs creation machine » to lift millions out of poverty. 

« Job creation is a top priority for every leader and we are working toward the goal of creating 80 to 125 million jobs over the next 15 years. »

« Job creation is a top priority for every leader and we are working towards the goal of creating 80 to 125 million jobs in the next 15 years, » said the Ethiopian leader. From this perspective, AeTrade’s interoperable payments and smart finance system should be a key component of the African Smart Finance and Digital Banking initiative’s support for MSMEs, women and youth. But more broadly, the facility will not be « just financial, » promised Mulualem Syoum, the founder of AeTrade Group seeing the project as a way to also « develop business know-how and make African-made products more visible in the national, regional and global market. » 

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