As vital financial brokers in Africa, Small and Medium Enterprises are being focused to drive the local weather dialog. Nevertheless, they should be empowered earlier than they’ll play that function successfully, OLUWAKEMI ABIMBOLA studies
The price of local weather change is clear in our lives at present and is considerably impacting companies. Whereas Nigerians are nonetheless lamenting in regards to the depth of the solar these previous couple of weeks, South Sudan goes by way of an excessive heatwave that has seen faculties shuttered.
South Sudan’s authorities closed down all faculties because the nation offers with a wave of utmost warmth anticipated to final two weeks.
The nation’s well being and schooling ministries suggested mother and father to maintain all kids indoors as temperatures are anticipated to soar to 45 levels Celsius (113 Fahrenheit).
They warned that any college open throughout that point would have its registration withdrawn. The federal government solely introduced final week that faculties would resume on April 2 after rain lowered the heatwave within the nation.
Nearer dwelling, the President of the Chartered Institute of Bankers, Ken Opara, in his opening speech on the simply concluded 2024 Inexperienced Finance Convention, which was held in Lagos, narrated the story of how the output and tempo of manufacturing of a producer elevated following the adoption of sustainable measures, which additionally curbed emissions.
Nonetheless in Nigeria, the Minister for Price range and Financial Planning, Abubakar Bagudu, at a latest occasion shared how a fishing neighborhood in Ilawe, Ogun State, transitioned from open water fishing the place the water now not had sufficient fish and was taught fish farming.
In accordance with the minister, it resulted in outstanding enhancements in outcomes.
“Within the north, we discovered that by way of a programme with the European Union, as little as an funding of N2m per pastoralist neighborhood taught them find out how to make yoghurt out of milk, subsequently, extending the shelve life in a really sustainable method, deepening their earnings, tripling it in as little as six months,” Bagudu added.
In accordance with the Organisation for Financial Co-operation and Growth, SMEs present 60 to 70 per cent of jobs in most OECD member international locations.
In Nigeria, SMEs contribute 48 per cent to the GDP and 84 per cent of jobs, based on the Nationwide Bureau of Statistics.
Not too long ago, the Particular Adviser to the President on Presidential Enabling Enterprise Surroundings Council and Funding, Dr Jumoke Oduwole, disclosed that there have been roughly 23.8 million household companies within the nation, accountable for thousands and thousands of jobs and collectively contributing round $200bn yearly to the nation’s financial system.
In accordance with a brand new examine by fintech agency, Moniepoint, for each two companies in Nigeria, one is family-owned and they’re the lifeblood and way forward for the financial system given their impression.
Given the centrality of MSMEs to the financial system, the 2024 Inexperienced Finance Convention, with the theme ‘The Function of Africa’s Non-public Sector within the Paris Settlement on Local weather Change’, which was organised by the African Assure Fund in collaboration with the Nordic Growth Fund, supplied a platform for stakeholders throughout the board to interact.
The Inexperienced Finance Convention, which is in its ninth version, supplied a platform for all stakeholders to dialogue and showcase the various benefits that inexperienced SMEs can contribute to the economies of Nigeria and Africa.
In accordance with the AGF, local weather motion, emission discount, and sustainable funding are now not optionally available value burdens.
“It’s inevitable – and important – that Africa and its personal sector keep forward of the curve. The total implementation of the Paris Settlement, for Africa, requires the lively participation of the personal sector, notably Small and Medium Enterprises, who’re globally recognised as the important thing drivers of financial development in Africa. SMEs make up over 90 per cent of enterprises and account for as much as 60 per cent of job creation and financial improvement.
“Their potential to cut back emissions and mitigate the environmental impression of their operations is a significant determinant of Africa’s progress in local weather change mitigation and adaptation,” mentioned the AGF.
In 2016, the Nordic Growth Fund grew to become the African Assure Fund’s fifth shareholder.
Underneath NDF’s management, AGF launched a Inexperienced Assure Facility to unlock financing for SMEs investing in local weather and inexperienced growth-oriented financial system.
AGF has since then considerably fostered sustainable development by providing the Inexperienced Assure Facility to lending establishments to allow them to ease entry to finance for Inexperienced SMEs.
The Inexperienced Assure Facility goals to extend sustainable private-sector-led financial development in Africa, by way of environment friendly utilisation of untapped clear power sources and different climate-resilient improvement initiatives.
To reveal the enterprise case for financing Inexperienced SMEs, the Inexperienced Technical Help/Capability Growth Grant enhances the Inexperienced Assure Facility by capacitating Non-public Finance Initiatives but in addition making certain that there’s a pipeline of credit-ready inexperienced SMEs that these PFIs can finance.
To facilitate a powerful worth chain in inexperienced financing, there’s a want for PFIs to foyer for nationwide, regional, and worldwide insurance policies conducive to all gamers to help lending on this sector, therefore the Inexperienced Finance Convention.
The Inexperienced Finance Convention is a response to the challenges of local weather change throughout the framework of Nationally Decided Contributions, a local weather motion plan to chop emissions and adapt to local weather impacts).
The convention aimed to analyse alternatives and suggest options needed to fulfill the financing wants of Inexperienced SMEs to allow them to accumulate abilities and applied sciences that may mitigate the consequences of local weather change.
The high-level convention was adopted by a three-day coaching on credit score danger and product improvement in inexperienced finance, for senior managers of monetary establishments.
Among the targets of the inexperienced finance convention and coaching embody highlighting the challenges of local weather change throughout the framework of nationally decided contributions, showcasing the various benefits that inexperienced SMEs can contribute to the financial system of Nigeria and strengthening the understanding of the Inexperienced Assure Facility and its technical help element.
Different goals of the convention are to analyse alternatives and suggest options needed to fulfill the financing wants of inexperienced SMEs to allow them to accumulate abilities and applied sciences that may mitigate the consequences of local weather change, and enhance the power of monetary establishments to deal with the monetary wants of the inexperienced SMEs.
Talking on the convention, the AGF Group Chief Govt Officer, Jules Ngankam, emphasised that the inexperienced finance convention was an important response to the challenges posed by local weather change and to empower banks to be higher capable of deal with the financing wants from that sector of the financial system.
He mentioned, “Our intention is to help the banks to enhance, enhance or develop their inexperienced portfolios. Via the mix of our Inexperienced Assure and Capability Growth help, we’re capable of bridge the information hole between each monetary establishments and their prospects. This isn’t just for the SMEs to grasp how the lending course of works, but in addition for the monetary consultants to find out how they’ll present options tailor-made to swimsuit the wants of the SMEs.”
Ngankam mentioned that the $300bn SME financing hole in Africa led to the creation of options to cut back the hole.
He remarked, “SME financing hole in Africa is estimated to be round $300bn and to cut back that hole, we provide two most important merchandise, monetary and technical as a result of we imagine that the answer just isn’t solely monetary. We’ve a monetary resolution, nevertheless it additionally must have a non-financial resolution. Once we speak in regards to the SME financing hole, that’s the consequence of comparable gaps.
“So, the primary hole is the knowledge hole. Many SMEs aren’t capable of present monetary establishments with the kind of data that they want to have the ability to do a correct danger evaluation. That is the place technical help and capability constructing may be helpful. We work along with the SME to do correct bookkeeping.”
He famous that AGF labored with monetary establishments to have the ability to leverage new know-how “as a result of now we speak in regards to the massive knowledge, we speak in regards to the AI all this know-how”.
“How they’ll leverage additionally all this know-how to have the ability to do a correct danger evaluation based mostly on what sort of knowledge they’ll get from the SMEs?”
Different gaps hindering financing within the sector embody the collateral hole, which the fund is attempting to deal with, by standing to interchange the collateral that the SMEs are supposed to supply to the monetary establishment, the tenor hole, which is principally the mismatch between the wants of the SME and what the monetary establishments are providing.
In accordance with the AGF boss, some SMEs could needn’t simply working capital however long-term loans to have the ability to develop their enterprise.
“So, we additionally work along with the monetary establishments to assist them mobilise long-term funding within the monetary market and by offering ensures to the traders. We’ve a danger hole. That is primarily the hole between the true danger and the essential danger. That is additionally one of many largest challenges that we undergo essentially the most in Africa. There may be all the time this misperception the place the investor believes that the chance is simply too excessive.”
Backed by NDF’s help, AGF has been capable of help monetary establishments by way of its risk-sharing mechanism, which is essential to incentivising banks to supply local weather finance to SMEs.
NDF Managing Director, Satu Santala, mentioned, “We’re dedicated to financing inexperienced and inclusive low-carbon and climate-resilient development of African economies to enhance the livelihood of communities. Partnerships are on the core of NDF’s method to local weather finance and the African personal sector performs a pivotal function in local weather motion and creating employment.”
Opara famous the essential function the personal sector performs in local weather change within the Paris Settlement, emphasising that the personal sector performs a pivotal function in unlocking new development, job creation and sustainable agriculture.
He mentioned, “We hope that local weather change efforts will unlock new alternatives for inexperienced development and job creation, starting from renewable power and clear know-how to sustainable agriculture. There are numerous avenues for the personal sector to get the required personal resolution that ship environmental, social, and financial advantages.”
A Particular Adviser to The Lagos State Authorities on Local weather Change and Round Financial system, Mrs Titilayo Oshodi, talking on behalf of the Secretary to the State Authorities, famous the necessity for extra consciousness on the impact of local weather change.
“It’s a resultant consider how we start to cope with the environment, how we start to play, what pictures are required of us to maintain the environment wholesome, to maintain it protected and climate-friendly. We have to begin to categorical the inherent alternatives by way of wealth that’s out there within the wealth that we generate,” she remarked.
In his feedback, the Honorary Consul of Finland in Lagos, Bankole Oloruntoba, emphasised that the availability of technical help was key for SMEs to entry finance.
Since its inception, AGF mentioned that it had issued a assure portfolio of roughly $1.9bn, unlocking greater than $3.5bn in SME financing, by way of partnerships with 200 associate monetary establishments in 40 African international locations.
