Southern African Development Community (SADC) Member States have been urged to design innovative finance mechanisms that will move away from traditional finance models in order to improve access to finance for Medium and Small to Medium Enterprises (MSMEs) in the Region.
The Member States should also establish dedicated marketing boards to focus on issues of lack of access to markets and finance for the MSMEs, put in place business support mechanisms, a good regulatory environment, and invest in mentorship skills for the businesses.
These were recommendations from breakaway sessions held during the annual SADC Regional Financial Inclusion Forum held in Johannesburg, South Africa, and attended by senior-level representatives who work on financial inclusion within the Ministries of Finance, Central Banks, Non-bank Regulators and the private sector. The financial inclusion strategies are assisted by the Support to Improving the Investment and Business Environment in the SADC Region (SIBE) Programme, which is supported by the European Union.
The session on “Improved livelihoods with a focus on Medium and Small to Medium Enterprises formalisation, and supply development programming” moderated by Mrs Palesa Sematlane, FinMark Trust Lesotho Coordinator, sought to gain a better understanding of why the MSME sector is important in terms of its contribution towards improving livelihoods, Gross Domestic Product and job creation. The session acknowledged the many interventions aimed at supporting MSMEs despite the many barriers that continue to prevent them from reaching their full potential, and unpacked the challenges, shared lessons learned, and identified opportunities.
Delegates recommended innovative finance mechanisms to improve access to finance through grant funding offered at 0% interest, and projects aimed at funding production inputs and infrastructure costs. It was noted that opportunities exist in developing and supporting village banks/savings groups/stokvels and that these structures may be used to offer credit to businesses. Participants called for the use of collateral registries and the use of movable assets to alleviate issues of risks and higher interest rates charged to MSMEs by traditional financial institutions.
They also urged matching grants aimed at providing a facility for MSMEs where they can be supported by funding 50% of their technical requirements; noting that countries might benefit from developing a sustainable microfinance sector. The delegates called for the establishment of dedicated marketing boards to focus on issues of lack of access to market and finance. This could be done through embarking on projects that seek to identify where MSMEs are, what they do, and the support they require so as to allow them to provide tailor-made solutions to MSME problems.
There was also a need for business development support by considering initiatives aimed at building business development centres which will serve various MSME needs, for example through creating one-stop shop centres where MSMEs may be assisted with developing business plans, accounting, and other services.
The session on “Digitalisation of payments with a focus on domestic and cross-border payments and remittances, and Transactions Cleared on an Immediate Basis (TCIB)” moderated by Mr Damola Owolade, FinMark Trust, Head of SADC Financial Inclusion, unpacked digitalisation as part of the SADC Financial Inclusion Strategy and SMEs Access to Finance and to better understand the country-level experiences to identify goals that cut across the SADC Region. TCIB is a payment rail for low-value cross-border payments that went live last year and seeks to make it easier for people to conduct cross-border payments, especially the unbanked and underbanked.
The session gave participants an opportunity to share ideas around digitalisation across the Region to help develop solutions that are relevant to each country. Delegates noted that Seychelles, which has demonstrated greater development than some other markets, has a digital identity system in place and needs to build on this to increase digital payments. Learnings from Seychelles can be leveraged by other countries in the Region. The SADC Secretariat needs to continue with its work on obtaining advocacy on the TCIB scheme. In terms of Know Your Customer implementation, there needs to be a reduction in the need for in-person onboarding and cash-based economies need to be addressed, the delegates recommended.
It was noted that market actors, businesses, and government are the three anchors of digitalisation. The key drivers of digitalisation in different countries include social grants and protection payments that encourage digital cards, mobile and electronic money options; government-to-person transfers, such as public servant salaries; and household payments such as water and electricity bills for electronic payments; among others.
