AU’s guarantee scheme for MSME to spur economic transformation


The African Union (AU) announced its plan to put in place a guarantee scheme for micro, small, and medium-sized enterprises (MSME) to speed up the economic transformation of the continent.

The director in charge of delivery program and coordination at the African Union Development Agency (AUDA-NEPAD), Amine Idriss Adoume said that lack of affordable finance is one of the biggest impediments for the expansion of small businesses in Africa.

Speaking during the launch of the Pan-African MSME Academy for Kenya, Mr. Adoume said: “The scheme will be developed jointly with partners and seeks to unlock access to affordable finance for the continent’s small businesses.”

The Pan-African MSME academy plans to launch across Africa with specific content for each country in line with local business environments.

According to Mr Adoume, the academy has been positioned to enable small entrepreneurs to achieve sustainable growth as they emerge through the COVID-19 pandemic.

He also added that the African Union is prioritizing the development of MSMEs because of its significance in Africa.

Currently, Africa has between 95 million and 100 million MSMEs, employing some 300 million people, Adoume said. He also added that MSMEs are a driver of economic growth and employment in the continent.

The credit guarantee scheme will be designed to provide comfort to banks so that they can extend loans to MSMEs Mr. Adoume said, noting that commercial banks shy away from providing credit to small businesses because they are perceived to have high default risk.

The cabinet secretary at the Ministry of Industrialization, Trade and Enterprise Development in Kenya Betty Maina said that Kenya is also developing a credit guarantee scheme that will support commercial banks to extend financial support to small businesses.

According to Betty, MSMEs are a critical part of Kenya’s economy as they constitute over 90 per cent of all businesses and provide 30 per cent of all employment opportunities.

According to Kenya’s ministry of industrialization, as a measure to cushion businesses and households against the effects of restrictions imposed to curb the spread of COVID-19, the Kenyan government has so far launched three rounds of economic stimulus packages.

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