LUSAKA, Zambia: June 26 (Xinhua) — A meeting of African experts organized to discuss financing for small and medium industries on the continent opened in Lusaka, the capital of Zambia, on Tuesday, with a call for African countries to utilize the potential of small and medium enterprises to embark on a path to industrialization.
The three-day meeting, organized by the United Nations Economic Commission for Africa (UNECA), has attracted more than 60 experts from the continent in the fields of private sector development, investment banking, mining agro-industries, commercial banks, finance and industrial policy.
Speaking at the start of the meeting, UNECA Director for the Southern Region Office, Beatrice Kiraso, said Africa has the possibility of making significant progress in industrialization if proper strategies and efforts are put in place to nurture small and medium businesses.
“There is a lot to learn from developing regions, like east Asia where such potentials have been unleashed to attain successful industrialization. Their success is an encouragement for us and shows that Africa also has the possibility to make significant progress in industrialization given proper strategy, policies and efforts,” she said.
She said the development of small and medium businesses is the major way through which the continent’s structural transformation and industrialization could be achieved but pointed out that access to finance has been a major constraint.
According to the official, access to finance has been a major constraint to the development of small and medium business, adding this has been exacerbated by critical factors such as poor access to markets, financial indiscipline and overbearing regulatory and operational environments.
“In addition, most small and medium industries lack the necessary collateral to obtain bank loans. This stems from the perception of higher risk, information barriers, and the higher costs of intermediaries. As a result, small and medium industries often cannot obtain long-term finance in the form of debt and equity,” she added.
To deal with the problem, she suggested African nations should put in place adequate policies and strategies that will assist the small and medium businesses to attain their full potential. According to figures, small and medium businesses account for over 90 percent of all enterprises in sub-Saharan Africa, of which 70 to 80 percent are micro and very small enterprises.
Meanwhile, Bank of Zambia (BoZ) Deputy Governor-Operations Bwalya Ng’andu, who officially opened the meeting, said banks should stop looking at small and medium businesses as a risky sector that should not be entertained.
While acknowledging small and medium businesses have been regarded as a risky sector by commercial banks, the official said there is need for the development of financial institutions that will see the sector as the core business and provide financial products for their needs.
The meeting is expected to review findings of a UNECA study on “Financing Small and Medium Enterprises in Africa” and to discuss different models and innovative sources of financing for small and medium businesses, including opportunities offered by emerging capital markets and the role of non-bank financial institutions. (Xinhua)