Lenders must do more for young businesses, says African Development Bank director

7th September 2017 Kennedy Abwao

Young entrepreneurs in Africa facing heavy debt burdens to keep their ventures afloat need stronger collaboration among financiers, commercial banks and impact investors, Chiji Ojukwu, the African Development Bank’s director of agriculture and agro-processing, told a  group of investors and young African business owners, at a meeting held at the bank’s headquarters on 4 September.

“We believe if we come up with successful strategies to address these issues, then our investments would have better impacts,” said Ojukwu .

He added that financiers should seek answers as to why successful financing strategies for reaching the youth have not achieved their main targets. Businesses owned by young people tend to suffer high interest rates and in some instances risk failure when financiers take equity stakes in businesses which lack the required financial planning to insulate them from inflation risk and which do not market their products strategically enough to attract investors. In some cases, financiers say more than 14 years’ worth of  bank statements are required for loans.

Young African entrepreneurs frequently cite the lack of funding for key business expansion and lack of technology support as drawbacks to business expansion.

The debt profiles of many youth-owned business in Africa present a challenge to the bank’s executives in terms of sustainably financing small companies. Yet, the bank has said it aims to promote access to finance as a key component of its programme to empower small and medium enterprises (SMEs) in the agricultural sector and in collaboration with the International Institute of Tropical Agriculture, the bank has announced the launch of its ENABLE youth programme to help grow business start ups in 2016.

The project aims to reach US$15 billion in investment in 31 African countries to create 300,000 agricultural enterprises and employ 10,000 graduates. The bank has so far invested US$774 million in loans to small businesses in six countries, in the Democratic Republic of Congo (DRC), Nigeria, Sudan, Cameroon, Malawi and Zambia.

The project is expected to leverage another US$0.5 billion in each of the 31 countries from private sector investment, according to Edson Mpyisi, the bank’s Enable Youth programme coordinator and its chief financial economist.

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