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Global Business Report:
Africa-Asia Business Forum IV
&
Improving SME Financing in Africa

Africa-Asia Business Forum IV:
Tanzania - The three-day 4th Africa-Asia Business Forum (AABF IV) was concluded in Dar Es Salaam, the seaside capital of this East African nation on the 14th of February 2007. The forum was immediately followed by a symposium on Small and Medium Enterprises Financing co-sponsored by Technonet Africa. The whole event wrapped up on Friday, February 16th at the prestigious Kilimanjaro Hotel Kempkinski.

The Kilimanjaro Hotel Venue of the AABF IV & SME Symposium February 12-16, 2007

The forum and symposium were sponsored by the Japanese government through the Tokyo International Conference for Africa's Development (TICAD) in conjunction with the United Nations Development Program (UNDP), the Tanzanian government and Technonet Africa.

Over 260 companies from 24 countries were invited to the forum, 41 of them from Asia. There were 159 companies that actually participated; 129 of them from Africa and 30 from Asia. Tanzania, the host country, was represented by 67 companies.

About US$156 million in business deals were concluded, representing the value of 118 MOUs signed by African and Asian companies.

Organizers adjudged AABF IV an unprecedented success as the $156M in business deals realized at this year’s event is more than double the $152.9M in declared value of the three previous combined AABF events.

SME Financing Symposium:
At the SME Financing Symposium that followed immediately after the business forum, different speakers from Asian, African and international finance institutions addressed the participants. There were presentations and speeches from delegations from the seven Technonet Africa countries namely Nigeria, South Africa, Ghana, Uganda, Cameroon, Mozambique and Tanzania, as well as some delegations from five non-member African countries, including Senegal, that were represented.

Later, symposium participants were divided into five groups to look at case-studies from five Asian countries. The Asians have had a longer history in conscious SME development and financing. The Sri Lankan group discussion was addressed by Mr. Ranjith Abeywardena, former banker from that country.

Case Study: Sri Lanka
Until 1977 the Sri Lanka ran a closed economy. After 1977, and with liberalization, the economy was opened up to compete in the international market. Economic liberalization attracted the World Bank which helped formulate SME financing measures. They decided upon a loan scheme to help SMEs and a National Development Bank to implement the scheme. The NDB also decided to use existing commercial banks' branch networks in distributing the SME loans instead of establishing its own. There were some initial problems. For instance, the SME were not getting the full benefit of the loan scheme because no commercial banks were willing to lend on a long term basis. The Central Bank of Sri Lanker had to step in with credit guarantees of up to 60 percent. The commercial banks were also avoiding giving out smaller loans until the government stepped in with 90 percent guarantee for such loans. Ten to 15 years later, the commercial banks have grown confident enough to be lending with their own money. Mr. Abeywardena put the success rate for the Sri Lankan SME loan scheme at 95 percent.

Lessons For Africa
The Asian experience has lots of lessons for the African situation. Several key factors were identified as crucial to the development and financing of SMEs:

(1) There had to be a conducive and enabling macro environment;

(2) The provision of effective Business Development and Support services;

(3) A supportive Banking system that was competent in handling cash flow based lending, equity support mechanisms, satisfactory infrastructure facilities etc;

(4) An active supportive role of governments in removing regulatory restrictions, introducing pro SME policies, and consistently emphasizing the importance of the sector;

(5) The international development partners, including regional banks, UNIDO and UNDP, have a crucial role to play in providing support for capacity development and providing long-term financial resources.

At the end of the symposium, delegates from the Technonet Africa countries passed the Dar Es Salaam Declaration to work toward easing access to finance for SMEs.

The Dar Es Salaam Declaration:
This symposium resolves that we, the member of TECHNONET Africa countries, namely, Cameroon, Ghana, Mozambique, Nigeria, South Africa, Tanzania and Uganda pledge our fullest commitment to work towards the easing of access to finance for the SMEs of our countries. To this end, we undertake to fully cooperate with TECHNONET Africa Secretariat to use our offices to influence, provide advocacy and facilitate initiatives taken towards the goal of easing access to finance for our SMEs.

MOUs Signed, By Sector

Case History:

Panicenduwelli Nig. Limited: Manufacturer of Bamboo/Wooden Floor Boards