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Finance: Small companies in Côte d’Ivoire struggle

By Baudelaire Mieu in Abidjan
Posted on Thursday, 11 July 2013 14:20

They represent 80 percent of Côte d’Ivoire’s companies, but small and medium-sized enterprises (SMEs) are feeling the pinch due to a lack of access to finance.

Even if in recent months local banks have set aside pools of capital to extend credit lines to SMEs, the impact is marginal.

“Banks are not refusing to finance SMEs. We are trying, but the problem is our lack of guarantees from SMEs. Most can’t produce financial records for the past five years.

“It makes it hard to lend,” explains Souleymane Diarrassouba, the president of Ivorian bankers’ association l’Association Professionnelle des Banques et Etablissements Financiers de Côte d’Ivoire.

For Bernard Labadens, director of the Ivorian subsidiary of French bank Société Générale: “We do what we can. We have a very dense portfolio. We prefer SMEs with solid guarantees.”

AfDB steps in

The return of the African Development Bank (AfDB) to its historical home in Abidjan, after 10 years’ exile in Tunisia, may help accelerate the local deploy- ment of the AfDB’s African Guarantee Fund for Small and Medium-Sized Enterprises.

The fund attempts to tackle problems from two sides.

First, the AfDB provides partial credit guarantees to financial institutions to incentivise them to lend.

It will also help banks build up their capacity to manage SME portfolios, which often provide managerial and administrative headaches for relatively small returns.

Given this difficult environment, the state-owned financial institution Versus Bank has reoriented itself towards smaller companies.

“Now 50 percent of our lending is directed towards SMEs, and we are planning to continue in this direction,” says Versus Bank’s director Guy Koizan.

To provide a more long-term solution to the problem, the Ivorian employers’ body, the Confédération Générale des Entreprises de Côte d’Ivoire, has created a guarantee fund to support SMEs.

It will attempt to foster trust between SMEs and banks, but the project has yet to move into its operational phase.

“The criteria to get financing are very complicated. And on top of that, the state is unable to pay its bills for public engineering works we have completed.

“We are undone. We need a real Marshall Plan for Ivorian SMEs,” says Jean Jacques Koffi, the director of a small construction company that has won government building contracts.

Selective financing

The World Bank is trying to help, with the $15m PARE/PME fund, a project launched in June 2010 that aims to strengthen the governance of SMEs.

“The fund is selective. We have around 30 SMEs we want to finance. Only those projects with strong growth potential will be targeted.

“It is not a total financing package, not for working capital,” explains Guy M’Bengue, the director general of the Association pour la Promotion des Exportations de Côte d’Ivoire, which is managing the fund.

Other more sustainable solutions might involve ‘angel investors,’ suggests the government.

Angel investors are businesspeople who provide funds for start-ups and help to grow businesses or get them off to a solid start.

“The investor or angel can be an answer for financing Ivorian SMEs, as the banks sometimes struggle to finance these companies in the medium and long term,”says Jean-Louis Billon, the commerce minister. ●

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