Access to finance: How Mongolia up MSME support and promoting African MSMEs with local solutions

Though international trade is a complicated industry, there is one truth that is simple: the world runs on finance. There is a mind-boggling amount of capital floating around the globe. However, access to this financing has proven difficult for many companies and countries.

This financing gap continues to be an impediment to equitable growth across all regions and will require a collective effort to alleviate it. At the International Trade Centre’s World Economic Development Forum 2023 in Mongolia, global industry leaders gathered to tackle this difficult problem.

TFG’s Deepesh Patel spoke to Degi Erdenedelger Bavlai, First Deputy Chief Executive Officer at Khan Bank and Hohete-Berhan Arefeaine, Co-Founder and Executive Board Member, African Fintech Network to review their “Access to Finance” panel.

It takes a team: Expanding access to SMEs

Finding ways to provide financing access to SMEs can be a difficult task, as there are numerous roadblocks in this process. However, it is possible to, and Khan Bank’s growth in SME market share is a prime example.

In 2019, Khan Bank’s market share for SMEs was hovering around 20%, which spurred the bank to take action. Now, as we are halfway through 2023, their market share of SME support is nearly 50%.

This expansion took a companywide shift in policies. Khan Bank underwent operational shifts, centralising credit analysis, and began funding SMEs, with a particular focus on women-led businesses. After the company targeted these priorities, they began to train 1,500 women and increased their financial support for SMEs.

Degi said, “For the SME side, a lot of collaborative approaches are needed. Strong policy support is needed, corporate guarantee funds, and equity support are needed for small and medium enterprises.”

Independent approaches: One size does not fit all

When speaking about trade finance in Africa, it is important to understand that the 54 independent countries in Africa all have different needs and requirements. Once the industry begins to approach African trade finance with this lens, the possibilities are endless. Hohete said, “We have a burgeoning youth population that is up and coming, that are digitally native. We have expanded infrastructure, and the cost of smartphones are coming down.”

Approaching countries and regions with specific, individual lenses is the key to unlocking the growth potential seen across many countries. The African Continental Free Trae Area (AfCTA) is one way to help support country and regional trade growth.

However, Hohete pointed out that while AfCTA is a good start, its progression will also be highly dependent on different countries’ infrastructure. Hohete said, “It will work in some countries, and there will be some countries where it’s going to take a while.”