Thursday, August 18Inside Business Africa
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IS FINTECH THE LIFE JACKET AFRICAN SMES NEED?

African SMEs need a life jacket.  However, the 64 thousand Dollar question remains: can FinTech throw this buoy to the drowning African SMEs?  This article explores the role FinTech plays in Africa as well as exactly how it can help save the continent’s SMEs.

Firstly, FinTech is a financial technology that accelerates and improves financial services chiefly through software.  African enterprises use FinTech to make payments, facilitate loan services, investment as well as insurance deals.

Moreover, African SMEs find FinTech very attractive because smartphone users in remote areas readily access the apps.  Many bank branches are not available in far-flung areas in Africa so FinTech is appreciated.

In addition, businesses looking to upgrade can employ FinTech to achieve this.  Many customers appreciate this technological inclusion by entrepreneurs.

Let us explore exactly how FinTech can help African SMEs.

HOW DO AFRICAN SMES RAISE CAPITAL?

Many rich countries recognize Africa as a goldmine waiting to be tapped.  Thus, nations like Singapore readily fund African SMEs with the necessary capital.

For instance, African companies raised more than $1.4 Billion in new capital.  Furthermore, Singapore’s Central Bank entered into various business partnerships with African countries to advance African businesses.

Singapore’s HQ Financial Group financed the Nigerian start-up firm Aella Credit with US$ 10 Million in debt financing.

Moreover, Singapore’s smart move strengthens the Africa-Asia economic partnership.  The nation is adept at FinTech so this alliance with African enterprises is helpful.

WHAT DO ALL THESE MEAN FOR AFRICAN SMEs?

African SMEs often lament about the inability to get capital to finance their businesses.  The reason is that banks have stringent regulations for lending capital to individuals as well as SMEs.

FinTech is a viable option for African businesses as international trade partners readily fund this sector.  Blockchain technology is a great way of sourcing the necessary funding for African businesses.  DeFi is another good option for African SMEs extension.

However, there is a caveat.  Some things need to be in place on the continent to enable foreign investors to help African enterprises.  These are:

Credit Bureaus

The African business database is sparse.  African governments ought to team up with the continent’s SMEs to fill this gap. 

Financial Trust Corridors

This is a setup that enables firms to build partnerships with foreign investors as well as establish trust.  Africa’s international trade partners can team up with the continent’s governments to establish Financial Trust Corridors.  This will enable African SMEs to source the funding they need.

Government SME-Focused Support Programs

African governments need to give tax concessions to help African businesses.  Without this move, banks and other FinTech enterprises will see the continent’s SMEs as too risky.

Conclusion

FinTech remains a veritable means of enabling African businesses to source much-needed capital. When African businesses incorporate FinTech into their business model, they can sit back and watch their enterprises grow.

However, African governments need to implement FinTech literacy classes for the continent’s business owners.  This will make FinTech appear less intimidating to the African enterprises as well as their owners.

See also: FG Secures $700 World Bank Loan to Tackle Poor Water Supply

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