Africa: New Study to Bridge Finance Gap of Small Business
Wednesday, August 29, 2007
Caught in a limbo between larger firms with access to traditional banking-sector finance and micro-credit initiatives designed to help the small enterprises of the very poor, African businesses in the middle have historically been on the wrong side of both extremes when it comes to accessing finance.
Now, a new joint African-European Union study aims to change that. Co-sponsored by the Cameroon Chamber of Commerce for Industry, Mines and Artisans (CCIMA) and the Brussels-based Africa Caribbean Pacific Business Climate Facility (BizClim), it will attempt to identify the mechanisms that are appropriate for the financing of very small and small enterprises (VSSEs) in the West African country.
The study is conducted in two phases, both of which are to be completed by the end of next month, and the results will be presented at a conference in the Cameroonian capital of Douala in November.
“The missing middle is undercapitalised. Areas such as small manufacturing companies, small farmers and artisans are desperately looking for finance and they need this support,” says Christophe Malherbe, a senior financial analyst at BizClim. “This sector does not represent the volume of the microfinance that the poor does, and now we want to find out how to address this.”
In the first phase of the study, in tandem with another local body, the National Society of Investment (SNI), CCIMA and BizClim will review existing financing options for VSSE businesses, attempting to understand the successes from failures in their financing models.
This first-phase review will be broad-based, covering so-called “network financing” which supports microfinance finance establishments that cater to small business, as well as credit guarantee funds, mutual guarantee societies, and cluster guarantee programmes.
The second phase of the study will review the conclusions suggested by the data collected and make a set of detailed recommendations regarding what mechanisms should be implemented to help ameliorate the needs of VSSE businesses in Cameroon.
“We hope not only to analyse the needs, but to suggest instruments to remedy them,” says Malherbe.
The analysis comes on the heels of the previously studied conclusion that a government-sponsored fund in Cameroon catering to small and medium enterprises would provide crucial finance. The study hopes to find a way to utilise capital from two new initiatives that seek to take the original fund’s place.
The first of these initiatives will be a mutual guarantee fund, known by its French-language acronym, FOGAMU, while the second will come via the efforts of Cameroon’s National Association of Microfinance Institutions (ANEMCAM) with the objective of further developing micro-finance in the country.
Both FOGAMU and ANEMCAM will be closely involved in the phase of the process that seeks to address the needs of businesses that have thus far been left out of traditional forms of financing.
A nation of nearly 17 million people, Cameroon was carved out of the French and British spheres of influence that succeeded the German colony of Kamerun, whose existence lasted from 1884 to 1916. It gained full independence in 1960.
Ruled since 1992 by Paul Biya, the country has had a historically testy relationship with its massive neighbour to the north, Nigeria, and fought several military engagements in recent years for control of the Bakassi peninsula, a spit of oil-rich land on the border between the two countries. A 2002 International Court of Justice ruling declared the land part of Cameroon, and Nigerian troops pulled out last year.
Though Cameroon has a relatively stable economy and last year posted a gross domestic product (GDP) growth rate of 3.5 percent, it has recently been under increasing pressure from the International Monetary Fund (IMF) to implement measures insuring greater transparency in its budgetary process, as well as increase measures taken towards privatisation and poverty reduction.
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