African Economic Outlook 2004/2005 Focus: Financing Small and Medium Sized Enterprises’ Development

The 2005 edition sheds light on the obstacles to the development of the African private-sector missing middle: the SMEs. Limited access to finance is a major obstacle to SMEs’ development as their inherent higher perceived risk makes financial institutions reluctant to lend to them and adequate financial instruments lack. Promoting SME access to finance will require combined effort at: improving the business climate, strengthening SME capacity to help them cope with formal banking requirements, promoting financial sector development, including the scaling up of micro finance institutions and diversifying the sources of financing, notably by favouring intra-private sector linkages.

• Financing SMEs in Africa (Policy Insights No.7 by Céline Kauffmann)