BADEA : on a crusade to help SMEs

According to the IMF, nearly $285 billion will have to be raised by 2025 to redress the economic imbalances following the Arab Spring. This is in addition to the financing needed for the continent’s development, including $100 billion for infrastructure in Africa alone. The private sector has a key role to play in meeting this challenge. And the private sector in Africa is SMEs. To fulfil their mission, SMEs need nearly 330 billion dollars.

With the majority of the economy operating in the informal economy and low levels of banking penetration, the challenge for Africa’s banking sector is significant. While the rise of FinTech offers concrete solutions to this dual challenge, only the genuine involvement of all stakeholders – the public sector, the private sector and consumers – alongside national and regional financial institutions can change the situation.

A « global coalition » for SMEs

This is the aim of the initiative launched by the Arab Bank for Economic Development in Africa (BADEA). Created in 1973 and owned by 18 Arab countries, BADEA’s mission is to help finance the economic development of African countries. On the occasion of the second edition of its Arab-Africa Trade Forum, held in Cairo in November 2021, it announced the launch of a « global coalition » in favor of African SMEs. In other words, the institution invited its peers – some thirty financial institutions from the continent and the Arab world – to make African SMEs a priority. Especially in the post-COVID19 context.

« While many African leaders have pledged to support young people and women entrepreneurs to unleash the potential for innovation (…), the COVID-19 pandemic [has] placed a heavy burden on MSMEs, which are estimated to number between 85 and 95 million on the continent, 86% of which are micro-enterprises with around ten employees, » said Dr Sidi Ould Tah, Director General of BADEA. « With COVID-19, there has been a significant erosion of our gains, both at the level of SMEs and large companies, and sometimes even at the level of states, » said economist Carlos Lopes.

BADEA’s global coalition aims to create synergies between African and Arab countries and provide concrete financial solutions to the problems faced by SMEs. Among other initiatives, the African Union Development Agency (AUDA-NEPAD), with the support of Ecobank and the commitment of many other players, including BADEA, launched in May 2021 a campaign called « 100,000 MSMEs », which aims to create one million jobs over the next three years. The ultimate goal is to create around 440 million jobs over ten years.

This coalition is the only one capable of bringing together actors willing to commit to working with SMEs, with a particular focus on women and young people

An initiative to be encouraged, according to Didier Acouetey, founding president of recruitment agency AfricSearch and initiator of the Africa SME Champions Forum, where he develops his analyses. « In Africa, we know very well that the financial markets are not deep enough in terms of liquidity and that they do not know enough about the local SME fabric, which in turn affects confidence in these companies. So the difficulty is twofold, both on the SME side and on the market side, » he pointed out, before recommending: « We need to think in terms of coalitions. In 2019, our partners at the Arab Bank for Economic Development in Africa (BADEA) have committed to supporting this coalition program to support SMEs, which was the subject of a dedicated forum in Cairo in November. The various players in this alliance – development banks, guarantee funds, investment banks, commercial banks and foundations – will then be able to discuss a coherent support program in which each member will play its part. This is a real change, because until now each player has taken initiatives in isolation. In this context, where there is a lack of visibility, I believe that this coalition is the only one capable of bringing together players who are willing to commit themselves to working with SMEs, with a particular focus on women and young people ».

A renewed commitment

This commitment was renewed at the latest Africa SME Champions Forum, held in Lomé in October. Badea, the event’s main partner, reaffirmed its commitment to African SMEs. This is reflected in a package of 10 billion CFA francs (15.2 million euros) for Togolese SMEs.

This package is accompanied by a second grant of 200 million CFA francs (almost 304,000 euros) from the African Guarantee Fund (AGF), an African guarantee fund based in Kenya. This will be used to provide technical assistance to SMEs. It is also increasing the number of partnerships and continuing its « coalition » in support of African SMEs.

SMEs are at the heart of BADEA’s strategy

« This 8th edition of the Africa SME Champions Forum is an important milestone in the coalition launched by BADEA and its partners. The idea is to bring together all the institutions with an interest in SMEs, » stresses BADEA Chairman Sidi Ould Tah, adding: « In the UEMOA region, SMEs account for 95% of all registered businesses. Today, SMEs are recognized as key players in achieving sustainable development objectives, but also for their ability to create jobs and reduce poverty. That’s why SMEs are « at the heart of BADEA’s strategy », which supports them through various instruments while multiplying partnerships « to pool everyone’s contributions in order to risk investing in favor of SMEs ». The Mauritanian economist concluded: « BADEA continues to advocate a coalition in favor of African VSEs and SMEs, so that all interested parties can combine their efforts through a holistic approach and resolve the various problems faced by SMEs. The ultimate goal is to make young people employable.

Find out more : https://www.badea.org