Creating growth opportunities for small enterprises in Africa
The IFC SME Solutions Centers are a key component of IFC’s support for small and medium sized enterprises in Africa. The centers promote access to finance for small and medium sized enterprises in the region complemented by specific capacity building services. Pilot initiatives are currently active in Kenya and Madagascar.
A One-Stop Shop
The SME Solutions Centers deliver an integrated package of small business-focused services under one roof. They support small and medium sized enterprises at different stages of business development to enable them to improve their business processes, human resources, structures, and products and services. As part of this process, participating enterprises graduate to a point where they are able to access finance through the SME Solutions Centers and, ultimately, from existing traditional financial institutions.
An Integrated Package
By leveraging both internal and partner resources, the SME Solutions Centers provide the following core package of products to small and medium sized businesses:
IFC SME Solutions Centers Service Offerings |
Business Information: The centers provide various information products and services on a commercial basis. These include access to reliable market information, broadband internet access, training facilities, database management, temporary office services, meeting rooms, and research facilities. The centers also operate fully-fledged incubation centers that enable small and meduim sized businesses to pool and share resources under one roof.
Capacity Building: Specific services provided under capacity building include assistance in setting up a new business, existing product enhancement, export development services, training, coaching and mentoring. Funds for capacity building are availed on a cost sharing basis through a part subsidy to participating firms. As part of the capacity building, the centers have successfully implemented and customized the SME toolkit for use in supporting the centers’ clients.
Access to Finance: This is a critical issue for many growing small and meduim sized enterprises in Africa. Smaller businesses generally struggle to attract finances, whether in the form of debt or equity. Traditional long-term bank finance is generally inaccessible to small and meduim sized enterprises because they lack the required collateral. Venture capital is not an option either as would be financiers cite the lack of opportunities to exit equity positions in small and meduim sized businesses at rates of return justifying risk.
To address these challenges, IFC has engaged Business Partners, a fund manager to set up the Business Partners International risk capital fund as the access to finance component of the SME Solutions Centers. Business Partners International (BPI) is a wholly owned subsidiary of Business Partners, a leading South African provider of risk capital to small and medium enterprises. So far, BPI has raised $14.1 million in Kenya and $10 million in Madagascar. IFC contributed 32 and 35 percent of the capital of the BPI risk capital funds for Madagascacar and Kenya, respectively. Other participating investors comprise of international investors such as the European Investment Bank, Commonwealth Development Corporation, Norfund, and Doen Foundation. A number of regional and local institutions have invested in the funds as well, including the Assurance Reassurance Omnibranche in Madagascar, and Trans Century Ltd and the East African Development Bank in Kenya.Using the funds raised, support is extended to qualifying small and meduim sized enterprises in the form of equity, quasi equity, and debt financing. Repayment and exit (where equity is provided) is generally achieved from the cash flow of the investee companies. |
Business Enabling Environment: By drawing from other IFC resources, such as the IFC PEP-Africa business enabling environment team, the centers are able to engage in policy advocacy on behalf of the SME sector. |
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Results to date
The SME Solutions Centers commenced operations in 2005, initially concentrating on providing business information and capacity building support to small and meduim sized businesses.The BPI risk capital funds for Madagascar and Kenya were closed on September 2006 and January 2007, respectively.
More than 450 small and meduim sized businesses have received enterprise level support to improve their processes. Over 3,000 employees from these businesses have participated in training provided by the centers. Currently, 16 companies are part of the in-house incubation facilities. More than 170 business plans have been received. out of which a good number are being considered for possible investment. To date, $2.1 million has been committed and a further $7 million is expected to be invested in qualifying small and meduim sized enterprises by December 2008.
"The SME Solutions Center has provided my start-up with accommodation and IT infrastructure which has accorded my company a running start. The offices are well designed and practical. They facilitate our personnel's work as well as inspire trust in our new clients. Well equipped training rooms also help our trainees to make the best of what is available. Apart from the facilities, the center is a place where it is easy to meet potential clients and form profitable relationships. As a matter of fact, my first contract was signed with one of the center clients. In short, the center is a wonderful concept supported by a great team of professionals."
–Ms. Hanta Ramakavelo, Managing Partner
Reference Consulting Ltd, Madagascar
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Contacts for IFC SME Solutions Centers |
Madagascar Office
Johanne Rajaobelina
Program Manager
SME Solutions Center,
Ariane 5, Zone Galaxy, Andrabaro
101 Antananarivo, Madagascar
E-mail: jrajaobelina@ifc.org
Phone: +261 20 23 26000
Fax: +261 20 23 26 003 | | Kenya Office
Kiragu Maina
Program Manager
SME Solutions Center
Africa Re Center, 1st Floor,
Hospital Rd, Upper Hill
Nairobi, Kenya
E-mail: kmaina@ifc.org
Phone: +254 20 280 5000
Fax: +254 20 273 0589 |
