Experts push for improved access to trade finance for SMEs.

Screenshot of online meeting in session

Economic experts are pushing for an improved access to trade finance for Small and Medium-size Enterprises, SMEs, in the context of the African Continental Free Trade Area, AfCFTA.

The reflection came up during a roundtable discussion on the theme: “Unlocking trade finance in the implementation of the African Continental Free Trade Area”.



The online meeting held recently was organised by the Cameroon Economic Policy Institute, CEPI, of the Henri Kouam Foundation. 

It had as speakers, renowned economic experts, including the likes of Prof Kelly Mua Kingsley, President of Prima Finance and Investment; Dang Attouh, CEPI research fellow; and Gervain Alex, founder of Total Plus Multipurpose.

The panel discussion was aimed at analysing the challenges and opportunities for SME trade finance following the signing of the AfCFTA. 

The session was attended by representatives of Afriland First Bank, United Bank of Africa, Ecobank and other microfinance institutions.

Going by Henri Kouam, SMEs are at a natural disadvantage when it comes to accessing trade finance compared to larger firms in Cameroon. 

He argued that this is due to their smaller distribution networks and limited portfolios where SMEs earning less than 5 million FCFA are considered too risky for trade finance lending. 

Further highlighting constraints to SME access to trade finance, CEPI founder stated that “Banks face difficulties tracking the impact of trade finance to SMEs as their activities are very fragmented and there isn’t sufficient interaction between all departments at various banks”. 

On his part, Dang Attouh explained that there are little support activities for SMEs looking to export with the procedures being complex. 

“For example, you require an export or import’ card, a tax number and certification from the Standards and Quality Agency, ANOR, regarding quality control,” Attouh said.

He added that “government credit guarantee schemes are limited to a few banks, which does not diminish the risk faced by other banks when lending to SMEs lacking the required collateral”.

 

Recommendations

During the panel presentations, it was recommended that banks should increase the share of loans given out to SMEs from about 6 to 15% of total financing and the cost of starting a business should be reduced such that new firms should get a three-year tax exoneration upon formation.

Equally, financial institutions and banks were called upon to focus on building the capacity of SMEs and potential exporters to reduce bad loans and improve their understanding of regulatory requirements.  

The panelist unanimously agreed that micro financial institutions should develop partnerships with banks and trade finance companies both locally and abroad to facilitate SME access to finance.  The online session was as part of a project dubbed “Trade for you” being implemented by CEPI.

about author About author : Macwalter Njapteh Refor

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