Accra, Ghana, December 31, 2018//-The International Islamic Trade Finance Corporation (ITFC), an autonomous entity within the Islamic Development Bank Group, is boosting trade finance for small and medium enterprises (SMEs) operating in West African countries.
To this, end the ITFC recently launched a novelty SMEs programme to provide financial and capacity building support for SMEs in West Africa.
Explaining the rationale of the programme to African Eye Report, the Chief Executive Officer (CEO) of ITFC), Eng. Hani Salem Sonbol said: “The ultimate objective of the ITFC West Africa SMEs Programme is to boost approval and disbursement of lines of finance through West African partner banks, enhance the capacities of banks and SMEs, and to ensure that the financing products reach SMEs”.
More precisely, the West Africa SMEs Programme will aim to grow lines of finance disbursement and approval in West Africa and boost Trade Finance product offerings at banks in the region, he added.
Eng. Sonbol continued: “It will provide advisory service and training for banks to start or strengthen their SMEs management and trade finance operations and partner with a network of service providers and intermediators to reach the SMEs”.
“It will also build capacity in a number of SMEs to decrease default rate on bank loans and substantially increase the number of bankable SMEs that get access to finance”.
We aim to rise to the challenge of enhancing the capacity of SMEs across the region, supporting them in the submission process for trade finance, while popularizing the practice of Islamic trade finance”, he stressed.
What prompted this move?
Since its inception in 2008, ITFC has been committed to improving financial access within the West African sub-region. With the understanding that SMEs are the backbone of economies within the region and in need of much support, ITFC gathered data then conducted a fact-finding mission to West Africa in 2017.
During this time, Eng. Sonbol noted that the team held several meetings with stakeholders to better understand the needs of SMEs and how ITFC’s interventions could be of value.
Meetings took place with financial institutions to get a clear understanding as to why SMEs do not really benefit from available lines of finance, according to him.
Also, meetings with the SMEs were held to understand the gap between requirements from financial institutions, what they can provide and how can this gap be closed.
“We found that, the trade finance gap at the SME level is enormous and unearthed the need for an Integrated Trade Solution combining capacity building programmes and trade finance facilities, which could lead to enhanced socio-economic transformation in the region”.
This among other key findings indicated a clear need to design and launch the ITFC West Africa SMEs Programme, Eng. Sonbol said.
Constraints to SME financing
The SME sector in West Africa is still largely informal with a variety of mostly self-funded enterprises that are involved in an array of economic activities, mainly concentrated in urban areas.
Additionally, they lack the requisite access to financial resources needed to scale upwards. Other constraints include maintaining of proper accounting and finance, succession planning, and management skills and knowledge.
How ITFC plans to address these
These raise the need for financing alternatives that consider other factors towards supporting the growth of SMEs. International Financial Institutions (IFIs), like ITFC, play a key role in improving access to finance for SMEs in developing countries.
“Our West Africa SMEs Programme is designed to revitalize and enhance utilization of trade finance instruments placed at West African banks for SMEs”, Eng. Sonbol emphasized.
The programme will include tools such as capacity building for partner financial institutions as well as for SMEs, support in loan acquiring procedures, and placement of trade finance lines at West Africa partner banks”.
Significance of SMEs for economies in West Africa
The SME sector in West Africa has been exploding over recent decades and is widely considered the driver of economies across the region.
For instance, according to the Central Bank of Nigeria, 96% of Nigerian businesses are SMEs and it is estimated that more than 95% of enterprises across the world are SMEs; accounting for approximately 60% of private sector employment.
Entrepreneurs are part of SMEs and if they are going to be able to radically change the fortunes of the region through the economic opportunities their ventures create, it is imperative that frameworks exist that enable the existence and growth of SMEs.
More than ever, West African SMEs require capacity development and improved access to trade lines of finance; we are hopeful that ITFC’s interventions will go far in achieving this, Eng. Sonbol stated.
African Eye Report
