Financing Small Businesses in Sub-Saharan Africa

Abstract

ABSTRACT This paper reviews some key models and best practices used in the financing of small businesses with Sub-Saharan Africa as a focus. For a region where poverty is the highest in the world, the need to develop sustainable microlending schemes is of paramount importance if Sub-Saharan Africa is to eradicate poverty. Over the last twenty years, donor agencies had been the key drivers in the microlending sector. However, there is now evidence to suggest that the approach by donor agencies in the financing of small businesses has not been sustainable. This paper examines some of the successful models in use and outlines some of the reasons why some of these models have been largely unsuccessful. The paper proceeds to identify the necessary steps to be taken by governments and other stakeholders in a bit to promote sustainable microlending models. The significance of venture capital in small business development is also discussed. From a managerial perspective, the key models outlined in this study are of significant importance in the promotion of sustainable microlending schemes. One of the key problems facing managers in this sector is in the area of training and research. Not many staff in this sector are trained enough to manage sustainable microlending projects. There is also lack of adequate research and managers therefore rely on outdated and, largely, unsuccessful schemes for future projects.