Millions of small- and medium-sized enterprises (SMEs) in the country and across Africa continue to struggle despite being the biggest contributor to economies, sector experts have said.

The observation was made on Tuesday during a three-day ‘SME and Banking Africa Forum’ at Kigali Convention Centre.

At the 4th edition of the summit, which brought together financial institutions, private sector players, policymakers, investors, and over 200 SMEs, experts indicated that the SME sector is faced with challenges of limited finance, high taxes, lack of markets, and inadequate skills, among others.

According to Eric Kacou, the chief executive and co-founder of Entrepreneurial Solutions Partners (ESP), a local business development organisation, 80 per cent of SMEs in Rwanda need technical assistance and capacity building, yet only 36 per cent of them have received any sort of technical assistance over the past three years.

"The finding is from a study we conducted for the past three months where we also surveyed 1,216 formal micro and small-scale enterprises in Rwanda. This study gave us a lot of information in terms of what they need. If you asked them how much they need they tell you that they need Rwf439 billion to invest in assets,” Kacou revealed.

Kacou said the issue is compounded by lack of information about markets, access to finance, training and business opportunities.

But Andrew Mugabe, the proprietor of Greenskins, a Kigali-based SME that specialises in vegetable growing using modern technologies, thinks taxation is a critical area that should be given much attention beyond finance and other challenges.

"A few days ago I was trying to purchase vertical vegetable gardens worth $180 each. When we inquired, we were told that we will be charged 18 per cent for Value Added Tax VAT and 25 per cent for the cost, marine insurance and shipping fees. This is almost half the value of the products,” he said, adding that the country should also invest more in tax education.

"This is because small businesses kick start operations without knowing exactly what kind of taxes they will pay and they end up closing because of not having planned well how much they will be paying,” he said.

According to the Ministry of Trade and Industry, 98 per cent of businesses are considered SMEs, contributing 41 per cent of all private sector jobs in the nation. However, most of them collapse before their fifth anniversary due to challenges related to macroeconomic factors, business environment, growth opportunities, and historical determinants.

Globally, the World Bank estimates that formal SMEs contribute up to 60 per cent of total employment and up to 40 per cent of national income (GDP) in emerging economies. Yet, more than 50 per cent of them lack access to finance, which hinders their growth.

Addressing current challenges

Jasper Eradiri Ebiekure, the director-general of Bayelsa State Government of Nigeria, believes that there is a need to harmonise efforts aimed at promoting SMEs in the region.

He said regional trade is important in driving efforts of individual countries to accelerate the development of the SME sector.

"I have seen in different African countries that SMEs are being supported, but this is the time to have an African umbrella body for SMEs, which can galvanise efforts of individual countries. This eases access to markets, access to finance, as well as innovation and technology,” Ebiekure said.

Kacou suggests that it is time for SMEs to adopt different innovative approaches other than relying on those that have failed to work.

"If we have tried certain things for so many years and they are not working, why can’t we look at different approaches? We need innovative financing models, trade facilitation approaches and more ways to enable these small and medium enterprises to thrive,” he said.

According to Tony Francis Ntore, the SMEs value chain specialist at IFC, the conference ought to bring the attention of different people to the challenges that SMEs face, not just in Rwanda but on the continent, as well as propose feasible solutions.

"We know that SMEs are facing many challenges beyond finance, and if you asked me I would highlight lack of knowledge to operate a business, wrong perception about banks, and not being able to design attractive business strategies. The conference is, therefore, bringing these issues to the attention of different stakeholders,” he said.

Ntore said, through networking, master classes and business to business organised sessions, SMEs got an opportunity to learn more about what they should be doing in terms of strengthening and promoting their businesses beyond their nations.

Also, through master classes, SMEs meet experts from different fields who practically share their experiences in marketing, business development and risk management, among other things.

Launch of $233 million initiative

Meanwhile, Alex Kanyankore, the chief executive of Rwanda Development Bank (BRD), was joined by officials from various institutions at the forefront of supporting SMEs to launch a $233 million funding initiative.

"This is a commitment from different institutions in Rwanda to collaboratively work to ensure whatever constraints that small and medium enterprises face are addressed. This is a great opportunity for them and it is up to them to develop bankable projects,” he said.

Dubbed "La Finance S’engage Rwanda,” the initiative, launched on Tuesday, will seek to improve access to funding by small businesses through mobilising the private sector to find concrete and innovative solutions for SMEs financing.

The forum, which closed yesterday, was organised by International Finance Corporation, in partnership with ESP, BDF, and BRD, among other partners.

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