Thirty-eight participants from 11 African countries completed the third annual Japan International Cooperation Agency (JICA) training programme for development financial institutions last month.

The training was carried at the Development Bank of Southern Africa’s Vulindlela Academy (DBBSA VA) in Pretoria, South Africa.

The third country training programme was part of a five-year programme initiated as a collaborative effort between JICA and the DBSA VA with the support of New Programme for African Development (NEPAD). Tomomi Tokuori, technical assistant to the NEPAD advisor says that the programme aims to address capacity constraints of relevant government officials and professionals within development financial institutions (DFIs) who are expected to play a key role in strengthening financial services to their clients, such as small, medium, and micro-sized enterprises (SMME). 

"Therefore, in this third training course, the emphasis was on educating officers and managers from DFIs to understand the SMME environment, challenges related not only to finance but capacity building issues as well,” he says.

He adds that this training programme will continually provide valuable information which will assist staffs in DFIs in their careers as well as the transfer of knowledge to their colleagues to strengthen the ability of the formal financial institutions in their countries.

"It will also help to support NEPAD’s initiative in Africa’s development,” he said. Of resent it is important to understand that international development policies have started to stress the importance of SMME in Africa with the broader macro-economic context of development process and growth strategies.

However, Tokuori says that while a great deal of emphasis has been placed on the promotion of SMME to accelerate economic growth, SMME still face various obstacles due to their size and isolation.

He attributes these obstacles to lack of specialised skills or equipment and inadequate access to formal financial institutions, markets, raw materials, and relevant information. 

"Accessibility to formal financial institutions is one of the most serious problems which SMME are facing in sub-Saharan Africa. Lack of access to medium or long-term credit is a major constraint for those enterprises that wish to expand their business,” he explains. 

The reasons for this are well recognised, particularly the fact that SMME present a high risk to the lender because many of them have inadequate assets and suffer from low capitalisation.

 Poor financial records also make it difficult for banks to assess the creditworthiness of potential SMME borrowers.

Through their accumulated experiences, it was realised that creating an asset is not an end in itself, hence the need to further develop.

"This requires officers and managers within the DFIs to ensure that the loans are sound, strong clients relationships are built and the institution can positively recover on non-performing loans,” Tokuori adds.