Financing African SMEs: can more of the same help bridge the gap?

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By Rodrigo Deiana, Junior Policy Analyst, and Arthur Minsat, Head of Unit for Europe, Middle East and Africa (acting), OECD Development Centre


The topic discussed here builds on the success of the 2017 Africa Forum


Africa-SMEsAfrican firms don’t have it easy. Among the many constraints faced by formal companies, access to finance consistently ranks as a top issue. Almost 20% of formal African companies cite access to finance as a constraint to their business.1 Overall, African micro, small and medium enterprises (SMEs) face a financing shortfall of about USD 190 billion from the traditional banking sector.2 African firms are 19% less likely to have a bank loan, compared to other regions of the world. Within Africa, small enterprises are 30% less likely to obtain bank loans than large ones and medium-sized enterprises are 13% less likely.3

To bridge this gap, governments and market players need to strengthen existing credit channels as well as expand new financing mechanisms.

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What’s standing in the way of South Africa’s entrepreneurs?

By Talitha Bertelsmann-Scott, Head : Economic Diplomacy Programme, and the entire Economic Diplomacy Programme team, South African Institute of International Affairs (SAIIA)


Explore the 2017 African Economic OutlookEntrepreneurship and Industrialisation in Africa for more on this subject.


Sout-Africa-EntreIndustrialisation is a key driver of sustainable development. It creates jobs, adds value and promotes trade through greater integration into global value chains. At the same time, entrepreneurship and small and medium enterprises (SMEs) are critical to every economy by creating jobs and innovative goods, promoting a competitive environment and economic growth, and facilitating income distribution. The South African government recognises the need for entrepreneurship and SMEs’ engagement with industrialisation efforts to address some of the key socio-economic challenges in the country, particularly poverty, inequality and unemployment. However, South African entrepreneurs 1 still face a number of constraints that hinder greater participation in industrialisation efforts. So, what are the roadblocks standing in the way of entrepreneurs? Continue reading

Broadening financing options for infrastructure in Emerging Asia

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By Kensuke Tanaka, Head of Asia Desk, and Prasiwi Ibrahim, Economist at Asia Desk, OECD Development Centre 


Learn more about this timely topic at the upcoming
1st International Economic Forum on Asia
Register today to attend on 14 April 2017!


Kensuke-Prasiwi-AsiaForumAgreeing on the need for new infrastructure is one thing; finding a sustainable way to finance it is another. According to the ADB, an estimated USD 26 trillion (or USD 1.7 trillion per year) will need to be invested in infrastructure in its developing member countries1  between 2016 and 2030 if these economies are to maintain their growth momentum, eradicate poverty and respond to climate change2  .Given the scale of investment needed, countries in the region will not have sufficient funds to meet demand. Indeed, financing infrastructure investment has been a considerable challenge for the region. Political factors can further complicate financing when they lead to the inefficient allocation of public funds. How best to finance infrastructure is, therefore, a key concern for policy makers in the region.
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Financing the SDGs in cities: Innovative new approaches

By Gail Hurley, Policy Specialist on Development Finance, Bureau for Programme and Policy Support, United Nations Development Programme

undp-mumbai.jpg
Mumbai is among a growing number of cities exploring green bonds as an option for financing sustainable urban development.

 “Cities are major drivers of the global economy. Today, cities occupy only 2% of total land but account for 70% of GDP.” (Habitat III, 2016)

Many of the investments needed to achieve the Sustainable Development Goals (SDGs) will take place at the sub-national level and be led by local authorities, especially in urban areas. Massive public and private investments will be needed to improve access to sustainable urban services and infrastructure, to improve cities’ resilience to climate change and shocks, and to prepare them to host 2.5 billion new residents over the next three decades, particularly in developing countries.  If city authorities can meet these challenges head-on, the sustainable development dividends could be immense. This reality underscores the need to recognise and strengthen the capacities of local authorities as major actors in promoting sustainable development.
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Maximising bang for the buck: Risks, returns, and what it really means to use ODA to leverage private funds

By Paddy Carter, Research Fellow, Overseas Development Institute

shutterstock_249974521The idea of using official development assistance (ODA) to leverage private finance is a staple of the financing for development circuit and features heavily in most donors’ strategies. Experienced financiers both from official sector development finance institutions (DFIs) and private investors are, however, still feeling their way into this field’s unfamiliar territory. DFIs for the most part emphasise the importance of providing finance on non-concessional terms to avoid distorting markets and crowding-out other sources of finance. Though some standard elements of their business could fall under the rubric of blended finance, such as grant-funded technical assistance, for the most part DFIs and development banks have treated explicit subsidies to private enterprises as dangerous medicine to be prescribed rarely. Now the pressure is mounting to find more creative ways to leverage private finance using ODA. But how?

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Reaching the last mile: The role of innovative finance in meeting the SDGs

By Judith Karl, Executive Secretary of UNCDF, and Samuel Choritz, Policy Adviser at UNCDF

financesdgsTo meet the SDGs with their emphasis on leaving no one behind, we need solutions that tackle persistent exclusions and inequalities in the local economies and communities where the poor live and work. Targeting the last mile means adapting solutions to the households, localities and small enterprises that are underserved, where development needs are greatest and where resources are scarcest.

Addressing market failures by making finance work for the poor is a critical catalyser to this end. Official Development Assistance (ODA) can be the largest source of external finance in least-developed countries, where private investment often favours commodity and real estate sectors. Disparities in incomes and living standards show that location matters more for living standards in developing countries than it does in developed ones [1]. “Last mile finance” models can use public resources — such as ODA — to de-risk and crowd-in public and private finance, especially from domestic sources, to create virtuous dynamics of inclusion, local growth, resilience, and productive investment. Continue reading

SDG data discussion: what next?

By Johannes Jütting, PARIS21 Secretariat Manager

After months of intense discussions, representatives from more than 190 national statistical offices agreed on a global monitoring framework for the 2030 Agenda and the Sustainable Development Goals (SDGs). The 17 goals and 169 targets of the framework will be complemented by 230 indicators. This is a huge achievement given the complex political and technical challenges that had to be solved to reach a consensus. Now, the United Nations Economic and Social Council and the United Nations General Assembly formally will endorse the framework.

Avoiding a stalemate with this finish line in sight and addressing the framework’s remaining blind spots require urgent attention. The two main points that still need to be addressed are: i) integrating the SDGs into national priorities and strengthening national statistical capacities for that process and ii) improving the indicator set.

Integrating SDGs into national priorities

The following table captures different reporting levels, organizations in the lead and the purpose of the reporting exercises:

SDG monitoring – roles and responsibilities

Global Regional and thematic National
Responsibility for SDG reporting UN Statistics Division based mainly on national data collected by international agencies Regional organizations, UN and other agencies harmonising SDG methodology for regional reporting National statistical systems and third-party providers supplying national and subnational data
Original data sources Country-level Country-level Country-level
Purpose Global monitoring focusing on world progress overall Regional and thematic monitoring focusing on relevant progress National monitoring focusing on national and subnational priorities

The relationship between UN technical agencies, such as WHO, UNICEF and FAO, and national governments in the production of statistics is complex. Much of the data we have currently on poverty, health, education or nutrition comes from large-scale international household surveys run by these agencies in countries. This is done in close collaboration with national statistical offices and often includes a capacity-building component that is very useful. However, involving agencies in the production of data can be problematic too as they have their own thematic agenda that might not align with national priorities or could even contradict those priorities. With the heavy SDG agenda, this risk increases substantially and could lead to a crowding out of national capacities.

Another equally important issue is the measurement exercise’s purpose. Do we focus all our attention on how best to do global monitoring? Or do we also focus urgently on producing national SDG data roadmaps that identify country-specific baselines, data needs and data filling plans for effective country-level actions? We should not forget that the data are supposed to help policy makers make evidence-based decisions and achieve impact. This happens primarily at national and subnational levels.

Improving the indicators

Even with general agreement on the indicator set, the real work remains. The consensus is clear that the indicators will need to be defined further over the coming months and years. Many indicators are yet to be supported by the required data or methodology. National statistical systems will face trouble with certain indicators or simply will lack the incentives to measure them at all. A good example is indicator 10.5.1 that measures the “financial soundness” of national policies: no government will be motivated to report on this aspect if the country is not doing well, especially given the possible impact on foreign direct investment decisions. Or take indicator 16.4.1 that asks for a country’s total value of inward and outward illicit financial flows. Illicit flows by their very nature are clandestine, making only vague estimates possible at best. Another blind spot is the current indicator on corruption: bribery is measured in the public sector whereas the private sector is not considered. Moreover, the indicator set ignores some important problems entirely. Obesity, for example, is not included but is a growing health problem in many middle-income countries, straining public services.

More technical work clearly is needed. But more importantly, the international community needs to provide the financial means to enable national statistical systems to do the job they are asked to do without undermining national priorities and taking into account their current capacity.

Where to go from here

The agenda needs to move now from the global to the national and finally to the local levels. Building partnerships among public institutions – agencies of the national statistical system – citizens and the private sector at the local level is critical. This hopefully will lead to better planning of conventional statistical operations and to building new models that involve citizens, businesses and nongovernmental organisations.

The conclusion is that achieving the SDGs will depend largely on strengthening national and local capacities in a creative synergy of data producers and users. Only then can we hope that policies will be able to reach those who live on the fringes of society. This is how we can leverage data effectively to fulfil the 2030 Agenda’s promise to “leave no one behind.’’

This blog also appeared on The Huffington Post. Click here to read it anew.


This article should not be reported as representing the official views of the OECD, the OECD Development Centre or of their member countries. The opinions expressed and arguments employed are those of the author.