The African SME Finance and Investment Network (ASFIN) brought together key stakeholders across the country for a one-day Sierra Leone SME Finance and Investment Summit on the 31st August, 2023, at the Radisson Blu Hotel, with the main motive of addressing some of the major challenges SMEs face in accessing finance.
According to Peter SaSellu, President and CEO of ASFIN, “In emerging markets, most formal jobs are generated by SMEs, which create 7 out of 10 jobs.” He informed how access to finance is a key constraint to SME growth adding that it is the second most cited obstacle facing SMEs to grow their businesses in emerging markets and developing countries, especially in Africa.
It is apparent that Small and Medium Enterprises (SMEs) are less likely to be able to obtain bank loans than large firms; instead, they rely on internal funds, or cash from friends and family, to launch and initially run their enterprises.
The International Finance Corporation (IFC) estimates that 65 million firms, or 40% of formal micro, small and medium enterprises (MSMEs) in developing countries, have an unmet financing need of $5.2 trillion every year, which is equivalent to 1.4 times the current level of the global MSME lending. About half of formal SMEs don’t have access to formal credit. The financing gap is even larger when micro and informal enterprises are taken into account.
Ashma Jalloh, the Coordinator of the Summit says the Sierra Leone SME Finance and Investment is timely. She says, “The Objective of the Summit is to focus discussions on adequate funding, access to finance and financial inclusion. This will take care of some of the problems such as provision of modern technology and low managerial skills.”
She says “the SME Finance and Investment Summit will examine the financing of SMEs in Sierra Leone and the various financing options available to SMEs. This will involve looking at debt financing by considering the role commercial, microfinance banks and other financial institutions and investors play in the financing of SMEs in the country. It will also consider the role of equity financing through venture capital and business angels financing. Efforts will aim at adequate funding of SMEs in Sierra Leone.”
According to Rebecca Paulson, Executive Director of ASPIN, “SMEs play a major role in most economies, particularly in developing countries. SMEs account for the majority of businesses worldwide and are important contributors to job creation and global economic development. They represent about 90% of businesses and more than 50% of employment worldwide. Formal SMEs contribute up to 40% of national income (GDP) in emerging economies. These numbers are significantly higher when informal SMEs are included.
According to World Bank’s estimates, 600 million jobs will be needed by 2030 to absorb the growing global workforce, which makes SME development a high priority for many Governments around the world.”