Africa: Why Debt Financing is So Important for the African Business Market

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Opinion - Small and medium-sized enterprises (SMEs) are the beating heart of Africa's economies. According to the World Economic Forum, as engines of growth, SMEs are responsible for around 80% of the continent's employment, ultimately helping to reduce poverty and income inequality, enabling the establishment of a new middle class and driving demand for new goods and services.

Small and medium-sized enterprises are the beating heart of Africa's economies. According to the World Economic Forum, as engines of growth, SMEs are responsible for aroundof the continent's employment, ultimately helping to reduce poverty and income inequality, enabling the establishment of a new middle class and driving demand for new goods and services.

have created a more competitive fundraising environment, with investors becoming more risk-averse. This could spell even greater trouble in access to financing as Africa has long been perceived as a high-risk environment for investors as a result of a fundamental misunderstanding of the continent as a homogenous entity rife with political instability, weak infrastructure, and other challenges.

Additionally, it is a lot easier for SMEs to forecast their expenses as a loan payment is consistent while interest on said debt financing can often be tax-deductible.Over the last couple of years, Africa's SME ecosystem experienced significant growth in spite of global economic uncertainty, attracting record amounts of funding against the global trend of a funding decline.

 

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