Increasing SME's access to finance in Benin
The problem faced by Ahoyo’s company is common to many SMEs in developing countries. According to Cyprian Bangirana, chairperson of the Kagango Coffee Farmers’ Association in Uganda, lack of trust between financial institutions, micro-enterprises and SMEs, farmers and cooperatives has worsened since the 2008 financial crisis. He said that the reluctance of the banking sector may often be understandable as many enterprises have weak financial management and discipline.
"The project assigned us a financial management counsellor who has helped us to improve the financial management of our association and develop a business plan." Aminatou Bagoudou, chairperson of an association of women fruit processors
ITC has responded to this problem with its Access to Finance for SMEs Programme. The programme develops the skills of SME managers in financial management, in particular strengthening their financial soundness and ability to submit bankable projects. At the same time it helps financial institutions to improve their understanding of the needs of SMEs, and their capacity to evaluate the potential and risks of projects and monitor the performance of loan recipients.
In Benin, the 2010–2012 Access to Finance for SMEs Programme has funding of US$ 1.4 million from the Government of Finland and is supporting the Agon Project – agon means pineapple in Fon, a Beninese language. The objective is to help export-ready and exporting micro- enterprises, SMEs, cooperatives and associations gain access to finance and financial services. The project aims to help develop the pineapple sector in Benin by promoting South-South trade and cooperation, thus improving the livelihoods of more than 3,000 people, including SME owners, their staff and families.
In Benin, the pineapple industry has faced several difficulties, including the high price of freight and lack of refrigeration capacity and appropriate packaging. Growers and SMEs have been unable to secure loans from local financial institutions to improve production and marketing.
Aminatou Bagoudou, chairperson of an association of women fruit processors, is one of the beneficiaries of the project. She said: ‘The project assigned us a financial management counsellor who has helped us to improve the financial management of our association and develop a business plan. The bank approved our loan application for 25 million CFA francs (US$ 50,000) after visiting our premises and interviewing us. The loan will be used to update processing equipment and buy more appropriate packaging with the objective of exporting processed pineapple juice to Burkina Faso and Niger.’
The ITC project partnered with the Bank of Africa (BOA), the Banque régionale de solidarité (BRS) and Fonds National de Microfinance, three banks that expressed interest in expanding their SME portfolios and engaging in the pineapple sector. To improve their understanding of the potential and risks related to SMEs, a training session was organized for lending officers. Loancom, an ITC credit-scoring tool that takes into account the financial and non-financial parameters of SMEs and associations, was provided to BOA. This software enables lending officers to better assess loan applications made by SMEs and associations.
"The Agon Project is the first of its kind in Benin to address the needs of the agricultural sector in such an inclusive and holistic way. Like the other financial management counsellors, I have built a long- term relationship with two SMEs and will continue to provide them with coaching and monitoring." Léon Agba, Agon Project coordinator, Agence Béninoise de Promotion des Échanges Commerciaux
The Benin project has also facilitated two guarantee funds with the French development agency, AFD, and Fonds GARI, a West African development bank, that can be used by BOA and BRS for the benefit of those in the Beninese pineapple value chain.
Léon Agba, a certified financial management counsellor and Agon Project coordinator at the Benin TPO, Agence Béninoise de Promotion des Échanges Commerciaux, said: ‘The Agon Project is the first of its kind in Benin to address the needs of the agricultural sector in such an inclusive and holistic way. Like the other financial management counsellors, I have built a long-term relationship with two SMEs and will continue to provide them with coaching and monitoring.’
Under the programme, 70 micro-enterprises and SMEs have been given access to financial services and, after some initial delays, the banks are now assessing applications for loans totalling US$ 3.9 million. Pending applications include Estelle Ahoyo’s but, meanwhile, with ITC technical assistance, her exports to Burkina Faso, Niger and Nigeria have substantially increased.
Yaya Ouattara, ITC Adviser on Access to Finance for SMEs, said: ‘The programme is not just about loans and finance: providing access to financial services, including bank accounts, and developing the financial capabilities of traders are just as important. I am confident that we have sown the seeds here in Benin, and that the benefits will be long-lasting.’
The programme is also active in Senegal, Uganda and Zambia, with funding from the United States Agency for International Development (USAID), the Government of Japan and NTF II.