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Beyond Financing: Rethinking the Non-Financial Challenges Faced By MSMEs In Africa

Posted on

February 6th, 2023

Beyond Financing: Rethinking the Non-Financial Challenges Faced By MSMEs In Africa

At the beginning of the year, we wrote a piece about the vital role MSMEs plays in driving Africa’s development. 90% of businesses in Africa are micro, small and medium enterprises. Although these enterprises play such a significant role in most of our economies, they face many challenges.

According to the London Stock Exchange Group’s in-depth research, financing is still one of the most pressing challenges facing these enterprises. 40% of MSMEs cite this as the most significant problem impeding their growth. There has been exhaustive research that has gone into identifying how to remedy the financing challenges and tackle why they exist in the first place.

Some of the barriers linked to financing include prohibitive collateral requirements by the lender, negative reinforcement, onerous edit credit checks.

Some of the pertinent non-financial challenges that MSMEs face throughout their life cycle include (but are not limited) to the following:

Low capacity and need for upskilling and training:

Due to strained budgets and a limited talent pool of excellent candidates, MSMEs always end up struggling to innovate and rethink how they run their businesses. Most times, the lack of proper budgeting resources would cause this issue.

Spurt! is piloting a Training and Empowerment Programme that would invest in recent university graduates and early career professionals with two to three years of work experience and give them a platform to learn while accessing mentorships from seasoned professionals across the board.

The Spurt! Training and Empowerment Programme (STEP) is one of the many resources that MSMEs can use to gain access to an excellent talent pool. There are other examples of training and upskilling programmes that MSMEs can utilize to widen their talent pool and narrow the skills gap.

Yusudi, an award-winning social enterprise based in Kenya, has trained over 2000 youth in business development and sales management. Many companies have been able to utilize the programme, and its 87% employment rate is an excellent indicator that there’s a lot to gain from such initiatives.

Absence of government-led SME strategy to develop the ecosystem:

While African governments acknowledge the crucial role MSMEs and those in the informal sector are playing in the growth of economies, there’s still a long way to go tax regulatory regimes are concerned. Corruption and a low result for the ease of doing business report also stifle small businesses growth. To remedy this, the government needs to strengthen the role of MSMEs in the ecosystem.

The government can realize this by implementing tri-sector collaborative efforts between government, corporate foundations and the private sector with aligned goals.

Slow adoption of technology:

The only constant thing in the world of business is change. The world is rapidly changing, and MSMEs are struggling to keep pace with any new technological advances. With an impressive uptake of new technologies, there’s room to boost access to and distribution of transformative technologies.

To achieve successful adoption of technology, MSMEs need to equip their teams with agile team members who can be able to adapt quickly to any new changes. Most of the solutions to this problem will feature a combination of ensuring that businesses are constantly upskilling and training their staff. When training is treated like a continuous process and not an event, a lot of business objectives are likely to be met.

Small businesses through umbrella organizations like the Nigerian Association of Small and Medium Enterprises (NASME), Small and Medium Enterprises Development Agency of Nigeria, Kenya National Chamber of Commerce and Industry, among others can act as catalysing agents in lobbying for more inclusive policies that would enable MSMEs seamlessly incorporate technology adoption as a core strategy piece.

At Spurt!, we are a platform that convenes, develops, and excites the best young African thinkers who are passionate about working for their continent’s economic development. We are facilitating a new wave of growth by enabling local SMEs. Our objective is to help build large local companies with sufficient scale and capacity to add value locally and regionally.


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