Eradiri: Tackling the SME financing challenge needs action, not just talk

Access to trade finance remains a significant barrier for Small and Medium-Sized Enterprises (SMEs) in Africa. Market analysts estimate that a staggering $6 trillion is accessible from multi-lateral finance institutions. In a recent interview with CNBC Africa, Dr. Jasper Ebiekure Eradiri, President of the All Africa Association for Small & Medium Enterprises (AAASME), shed light on the challenges and opportunities for SMEs in the continent. Dr. Eradiri emphasized the need for action rather than just rhetoric to address the financing gap faced by SMEs in Africa. The journey towards facilitating access to trade finance for SMEs in Africa has seen some progress. With 55 countries and 5 regions in Africa, SMEs are poised to connect and leverage the opportunities presented by the African Continental Free Trade Area (AFCFTA). Dr. Eradiri applauded the African Union for its efforts in creating a conducive environment for SMEs to engage and thrive. The annual African Union SME Forum serves as a platform for SMEs to collaborate and align with the AU's SME strategy. Despite the strides made, challenges persist, particularly in the realm of trade finance. Dr. Eradiri raised concerns about the existing financial template that often hinders SMEs from accessing the necessary funding to expand their businesses and explore new markets. The current system, predominantly designed by colonial powers, does not cater to the specific needs of African SMEs. The dialogue on re-engineering the financial landscape for SMEs has gained traction over the years. The concept of an Afrocentric finance model has emerged as a potential solution to the financing conundrum faced by African SMEs. Dr. Eradiri emphasized the importance of devising innovative solutions tailored to the unique challenges and dynamics of SMEs in Africa. In addressing the high-risk perception associated with SMEs, Dr. Eradiri highlighted the need for a paradigm shift in viewing SMEs as informal and risky entities. Contrary to popular belief, data suggests that the formal sector accounts for a higher percentage of loan defaults compared to SMEs. This challenges the conventional narrative surrounding SME financing and underscores the necessity for a more nuanced approach. The role of government in fostering an enabling environment for SMEs was a focal point of the discussion. Dr. Eradiri emphasized the dual responsibility of governments in formulating policies and creating conducive conditions for private sector growth. The synergy between public and private sectors is essential in propelling SMEs towards sustained growth and prosperity. Looking ahead, Dr. Eradiri expressed optimism about the prospects of AFCFTA in catalyzing trade and economic development across Africa. The integration agenda envisioned by AFCFTA holds immense potential for SMEs to scale their operations and tap into regional markets. By actively engaging with the AFCFTA secretariat, SMEs are poised to play a pivotal role in shaping the future of intra-African trade. In conclusion, the call for action to address the SME financing challenge in Africa resonates strongly. The imperative lies in proactively redefining the financial ecosystem to empower SMEs and unlock their full potential. With concerted efforts from both public and private sectors, the journey towards facilitating sustainable economic growth for SMEs in Africa is well underway.