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Technology Financing for Start-up SMMEs in Africa


By Emmanuel Allottey


Availability of finance remains one of the main obstacles to the development of Small Medium and Micro Enterprise (SMEEs) in Africa. Despite the progress and initiatives by financial institutions in supporting grassroot SMMEs through different initiatives, many SMMEs are unable to meet the requirements to access formal credit conditions due to high interest, high collateral requirements and complex technical and bureaucratic requirements.

Financial institutions have the opportunity to introduce an innovative method of supporting SMMEs without the stringent conditions involved with traditional financing. Technology finance in principle, is the funding of the technological needs of SMMEs. SMMEs lack the resources to incorporate technology into the running of their businesses. SMMEs at start-up require the most basic technological support examples being Electronic Point of Sale (EPOs), Internet, Computers, accounting and payment software to efficiently run their business.

Financial institutions should consider funding the technology setup required by SMMEs. This technology includes EPOs, website development, Application development amongst others. The funds for the technology can be paid directly to the supplier eliminating the risk of misuse of funding. A partnership with technology suppliers will ensure owners and employees of SMMEs are expertly trained to operate the technology. Technology financing directly eliminates the inconvenience and long process involved with the movement of money in SMME’s.

Technology financing will play a role in driving e-commerce for start-up SMMEs. The use of e-commerce is the fastest way for a business to grow and increase its market penetration and target market. Digitisation has had a profound impact on how SMMEs do business. Mobile technology, in particular, is transforming the way that SMMEs source, produce, market and sell their products. The transition from a start-up SMME to a stable high growth business is possible through the adoption of technology.

Technology financing can play a dual role as a Financial Inclusion strategy to drive the adoption of financial technology in SMME’s. Financial Institutions have a mandate to promote financial inclusion by providing the means for businesses and individual customers to use access financial products and service. The adoption of digital technology creates an ecosystem where customers of SMMEs will switch to digital channels to pay for products and services being rendered by SMMEs.

Financing options for start-up SMMEs, cannot be defined in isolation. Financial institutions need constant engagement with stakeholders to ensure they provide innovative solutions that meet the needs of SMME’s and foster their growth and development.

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