C?te d’Ivoire moves to boost SME financing

Local businesses in C?te d’Ivoire should benefit from additional funding over the coming months, as a drive to make much-needed credit lines available to small and medium-sized enterprises (SMEs) gains momentum.

At a forum hosted by the African Development Bank (AfDB) at its headquarters in Abidjan in November, Ivorian lenders pledged to dedicate CFA1.34trn (€2bn) in financing to SMEs this year.

The injection of credit aims to relieve pressure on smaller-scale companies, many of which have traditionally struggled to obtain funding, despite forming the backbone of C?te d’Ivoire’s economy.

The funding boost comes as the Abidjan-based Bourse Régionale des Valeurs Mobilières (BRVM) also sharpens its focus on SMEs as part of a bid to strengthen the stock exchange. Its plans include the launch of a trading platform dedicated to SMEs and measures aimed at encouraging smaller businesses to list.

C?te d’Ivoire defines SMEs as companies with fewer than 200 employees and a turnover of no more than CFA1bn (€1.5m). Last year Jean-Louis Billon, minister of commerce, noted that while 80% of all firms operating in the country could be categorised as SMEs, the segment was receiving just 12% of total investment. 

A lack of financing is seen as a major impediment to segment growth, with the Ministry of Economy and Finance estimating that 70% of SMEs are still unable to obtain bank credit. Its findings are backed by recent research undertaken by the IMF, which found that 45% of small businesses consider accessing funding to be their biggest challenge.

Limited access to finance is not unique to C?te d’Ivoire – SMEs in most African markets face similar problems – but it is emblematic of a broader problem in the Ivorian banking sector. Bank financing to the private sector was only 70% of GDP in 2015, below the global average of 88% in 2016, according to the World Bank. Furthermore, in a challenging environment, lenders have proved hesitant to grant loans to smaller clients that are less transparent than bigger outfits in areas such as governance, accounting and management processes. 

A survey by consulting firm Entrepreneurial Solutions Partners released at the AfDB forum put the funding requirements of the country’s SME segment at CFA3.6trn (€5.7bn), with banks and finance institutions supplying around 40% (CFA1.46trn, €2.2bn) of these needs currently.

The country is also part of a regional initiative to diversify financing tools for SMEs, with the BRVM – which serves as the regional bourse for Francophone West Africa – moving closer to launching an SME-specific exchange. 

Edoh Kossi Aménounvé, director-general of the regional exchange, told OBG that an alternate trading board for SMEs, which has been three years in the making, is now nearing completion. He added that the BRVM also planned to set up a $2bn fund aimed at encouraging SMEs to go public. “Creating a conducive ecosystem around SME financing is key to allowing these smaller companies effective access to capital markets,” he told OBG.

SME exchanges have traditionally seen a slow take-off in African markets, with similar efforts in Ghana, Nigeria and Kenya attracting only a handful of listings and limited trading.

However, the prospects for the BRVM are bright, given its recent expansion. The BRVM has performed strongly in recent years, doubling its market capitalisation since 2012 to CFA7.7trn (€12.3bn) by the end of 2016. It also gained admission to the MSCI Frontier Markets index in November.

The bourse registered four initial public offerings (IPOs) in 2016: Bank of Africa Mali in May; Société Ivoirienne de Banque in October; and Burkina Faso’s Coris Bank International and Ivorian agribusiness firm Sucrivoire in December. 

More than one-third of IPOs launched on the continent in 2016 took place on the BRVM. The exchange will now be looking to the new SME platform to help maintain listings’ momentum and cement the exchange’s position as a key regional player.

SMEs are also benefitting from the launch of several SME-oriented funds, which indicates growing appetite for private equity capital.

The Ivorian fund manager PCM Capital Partners, which already runs the $50m SME-oriented West Africa Emerging Markets Growth Fund, is in the process of setting up a second $100m fund to broaden its SME portfolio. Meanwhile, in September, Oasis Capital Ghana, a private equity firm based in Ghana, closed its first Oasis Africa VC Fund, a $27m initiative focused on SMEs in Ghana and C?te d’Ivoire. 

The industry is now calling for further regulatory changes that will give private equity added momentum. “Granting fiscal, legal and economic incentives could be instrumental in improving C?te d’Ivoire’s attractiveness to SME-focused fund managers,” Laureen Kouassi Olsson, head of financial institutions and the West Africa office of private equity firm Amethis Finance