As a result of rising demand for goods and services, and a population with an increasing disposable income, McKinsey estimates consumer spending in Africa will rise to over $1tn by 2020. Now more than ever, SMEs are looking to take advantage of the opportunities these conditions have created. However, with Africa’s credit gap exceeding $360bn, these businesses will struggle to meet demand.
The World Bank reports that SMEs now represent 90% of Africa’s economic fabric, and around two thirds of full time employment in emerging markets. Despite this they have very limited access to quick, reliable and affordable credit. Financial institutions in Africa have proven to be ill-equipped to deal with SMEs’ demand for credit, lacking the infrastructure needed to appropriately score risk, lend quickly and lend securely. With such a huge proportion of the African economy reliant on SMEs, it’s important that they have access to the capital they need to avoid Africa’s economy falling into what economists describe as ‘the middle income trap’ and stagnating.
The difficulties in the banking sector are not representative of areas where Africa has been quick to adapt to its markets, such as mobile technology. Mobile penetration in Africa is now at 67% rising steadily year on year and Ericsson expects this figure to reach nearly 100% by 2021. The popularity of mobile devices is presenting a huge opportunity for entrepreneurs that can utilise it.
The upcoming roundtable will tackle these issues, looking at the opportunities for SMEs and casting a light on the difficulties they face. Participants will discuss innovative ideas to counter the lack of infrastructure, risk mechanisms and organised due diligence procedures currently standing in the way of accessible capital. Most importantly they will be discussing the ideas, political nuances and market trends that will change the way small business is done in Africa.
Roundtable topic: “Powering SMEs to unlock the potential of Africa’s growing consumer market”