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Financing Growth: Options and Strategies for Small and Medium-sized Enterprises (SMEs)

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Financing Growth: Options and Strategies for Small and Medium-sized Enterprises (SMEs)

 

Small and Medium-sized Enterprises (SMEs) play a vital role in driving the economic growth and innovation of a country. However, accessing adequate financing for growth can be a challenge for many SMEs. With good access to financing, SMEs can grow steadily and unlock their full potential.

In this article, we will explore various options and strategies available to SMEs to secure the necessary funds for expansion and development. We will also highlight key causes of financing challenges faced by many SMEs and discuss their potential solutions.

 

Causes of Financing Challenges for SMEs

Small and medium-sized enterprises (SMEs) often face difficulties when it comes to financing. Here are some of the causes of financing challenges that SMEs encounter:

  1. Limited digital presence: Many SMEs have limited digital presence, hindering their ability to attract customers and access online markets. Recent survey has shown significant percentage of consumers have increased their online shopping since the pandemic, emphasizing the need for SMEs to enhance their digital capabilities to remain competitive and attract financing opportunities.
  2. Cashflow management: SMEs often face difficulties in managing cashflow effectively. Businesses with clear insight into their financial position can make adjustments quickly during uncertain times. However, SMEs may lack real-time financial information, making it challenging to control cashflow and demonstrate financial stability to potential lenders or investors.
  3. Limited access to technology: Investing in technology is an effective way to attract financing for SMEs. However, it is revealed that only a small percentage of SMEs are currently investing in technology. Limited access to technology and digital tools can hamper SMEs’ growth prospects and hinder their ability to attract financing from tech-savvy investors.
  4. Limited Collateral: SMEs struggle to provide sufficient collateral to secure loans from financial institutions. Lenders typically require collateral as a form of security, but SMEs may lack significant assets or possess assets that are difficult to value or convert into cash, such as intellectual property or customer relationships.
  5. High Interest Rates: Due to their perceived higher risk, SMEs face higher interest rates on loans compared to larger, more established businesses. These elevated rates significantly increase the cost of borrowing for SMEs, making it more challenging for them to access affordable financing options.

 

Strategies for Financing Growth for SMEs

Getting the required Financing for growth can be challenging for Small and medium scale businesses (SMEs), but there are several strategies one can employ to access financing for SMEs. Here are some of the common approaches for financing for SMEs:

1.     Embrace digital transformation

SMEs should prioritize investing in technology and digital tools to enhance their operational efficiency, expand their customer base, and access new markets. Adopting e-commerce platforms, leveraging digital marketing strategies, and implementing financial management software can improve revenues, lower costs, and increase the attractiveness of SMEs to potential investors.

2.     Diversify funding sources

SMEs should explore various funding sources beyond traditional bank loans. Options such as government-backed loan schemes, angel investors, venture capital, crowdfunding platforms, and strategic partnerships can provide alternative avenues for financing growth. Some of the available options for funding include:

  1. Traditional Bank Loans: Approach banks and financial institutions for loans to fund your growth initiatives. Prepare a comprehensive business plan, financial projections, and collateral to demonstrate the viability of your business and your ability to repay the loan. Traditional loans often come with fixed interest rates and repayment terms, so ensure you can meet the repayment obligations.
  2. Small Business Administration (SBA) Loans: In some countries like the United States, the Small Business Administration provides various loan programs specifically designed to support SMEs. SBA loans typically have favorable terms, such as lower interest rates and longer repayment periods. Research the SBA loan programs available in your country or region for potential financing options.
  3. Crowdfunding: Platforms like Kickstarter, Indiegogo, and GoFundMe allow you to raise funds from a large number of individuals who believe in your product or service. Crowdfunding can be an effective way to generate capital while simultaneously building a customer base and creating buzz around your business.
  4. Grants and Government Programs: Explore grants, subsidies, and government-backed programs designed to support SME growth. These programs vary by country and region, so research the options available to you. Local chambers of commerce and business development agencies can provide information on available grants and programs.
  5. Strategic Partnerships and Joint Ventures: Collaborate with complementary businesses through strategic partnerships or joint ventures. This can provide access to shared resources, expertise, and potential financing. By pooling resources and leveraging each other’s strengths, you can fuel growth without relying solely on external financing.

 

3.     Develop a compelling growth strategy

SMEs need to articulate a clear and compelling growth strategy that demonstrates their vision, market potential, and differentiation. By aligning their strategy with potential investors’ interests and showcasing a sustainable business model, SMEs can enhance their attractiveness to funding sources. It is essential to regularly review and adapt the growth strategy based on changing market conditions and emerging opportunities.

4.     Embracing Innovation

In times of crisis, like the COVID-19 pandemic, and cash-crunch SMEs must reevaluate their business models and explore innovative approaches. This may involve pivoting their products or services, finding new markets, or developing unique value propositions. Financing options that support research and development, innovation grants, or partnerships with innovation hubs can provide SMEs with the necessary resources to pursue growth through innovation.

 

Conclusion

Securing financing for growth is a critical challenge for small and medium-sized enterprises (SMEs) as they strive to expand and unlock their full potential. However, by embracing the digital transformation, strengthening financial management practices, diversifying funding sources, and developing a compelling growth strategy, SMEs can enhance their chances of obtaining the necessary funds for their expansion and development.

 

 

Frequently Asked Questions

 

What are the common financing options available for small and medium-sized enterprises (SMEs)?

Common financing options for SMEs include traditional bank loans, lines of credit, strategic partnership, equipment financing, invoice factoring, crowdfunding, angel investors, venture capital, and government grants or loans.

 

How can SMEs secure funding for their growth initiatives?

SMEs can secure funding for their growth initiatives by taking a proactive approach. This includes developing a comprehensive business plan, showcasing strong financial projections, maintaining a favorable credit history, building relationships with lenders or investors, exploring alternative financing sources, and leveraging government programs or initiatives designed to support SMEs.

 

What are the key challenges faced by SMEs in accessing financing?

SMEs encounter several challenges when seeking financing, such as limited collateral or credit history, high interest rates, stringent lending criteria, lack of financial literacy, competition for funding, and economic conditions.

 

Are there any alternative sources of financing that SMEs can explore?

Yes, SMEs can explore alternative sources of financing such as crowdfunding platforms, angel investors, venture capital firms, private equity firms, trade credit from suppliers, peer-to-peer lending platforms, and government-sponsored programs designed to assist SMEs.

 

What are the implications of choosing debt financing versus equity financing for SMEs?

Choosing debt financing means taking on loans that need to be repaid with interest, while equity financing involves selling a portion of the business to investors in exchange for funding. Debt financing requires regular repayments and interest costs, while equity financing dilutes ownership but does not require regular repayments.

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BUSINESS

African Development Bank signs $45 million grant agreement with Chad for asphalting of the Kyabé-Mayo road section

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African Development Bank signs $45 million grant agreement with Chad for asphalting of the Kyabé-Mayo road section

The African Development Bank (www.AfDB.org) and the government of Chad have signed a grant agreement worth $44.9 million to finance the asphalting of the 49.5-kilometre Kyabé-Mayo section of the Kyabé-Singako road, including the construction of a 55-metre bridge.

The agreement was signed in N’Djamena on 19 February 2025 by Tahir Hamid Nguilin, Minister of State for Finance, Budget, Economy, Planning and International Cooperation, and Claude N’Kodia, the Bank’s Acting Representative in Chad. Several members of the Chadian government were also present, including the Minister for Infrastructure, Access-Improvement and Road Maintenance, Amir Idriss Kourda, and the Secretary of State for Finance and Budget, Ali Djadda Kampard. Also present was a delegation from the International Monetary Fund, led by its head of mission for Chad, Julien Reynaud,

African Development Bank signs $45 million grant agreement with Chad for asphalting of the Kyabé-Mayo road section

African Development Bank signs $45 million grant agreement with Chad for asphalting of the Kyabé-Mayo road section

The funding will support one of the Chadian government’s key development objectives through strategic infrastructure improvement.

“The [Moyen-Chari] region, including Kyabé, Singako and Am Timan, has strong economic potential. It is Chad’s main agricultural basin and livestock area, rich in fish resources. Fish are supplied from Moyen-Chari to a large part of the country’s south and even to foreign markets,” stated Nguilin, also the Bank’s Governor for Chad.

The road project will open up southern and eastern regions of Chad, reduce vulnerability, and strengthen the resilience of local populations, especially women and young people. It will improve the transportation of goods and people between Kyabé and Singako by providing an all-weather road, facilitating the flow of agricultural and animal products from the rich areas of Moyen-Chari and Salamat to the consumer centers of Sarh, Moundou, N’Djamena and Abéché. It will also enhance accessibility to Moyen-Chari from neighboring Sudan.

The agreement paves the way for support from the Islamic Development Bank to finance the second section of the 205-kilometer Mayo-Singako-Am Timan at an estimated cost of $275.5 million.

“The African Development Bank is a strategic partner of Chad, particularly in the transport sector. The construction of the road section will reduce the overall cost of transport in Moyen-Chari […] and improve the living conditions of local people thanks to easier access to health and education facilities and to the country’s main consumer centers,” said N’Kodia.

The Kyabé-Mayo section of the Kyabé-Singako road is one of the missing links in the N’Djamena-Moundou-Sarh-Kyabé-Am Timan-Abéché corridor and forms part of the priority structuring network that the Chadian government aims to develop to ensure nationwide coverage and permanent accessibility.

The African Development Bank Group remains a strategic financial partner for Chad, with its strategy paper focusing on two priority pillars: developing infrastructure to achieve strong and diversified economic growth and promoting good governance to increase the effectiveness of public action and the attractiveness of the economic environment.

Distributed by APO Group on behalf of African Development Bank Group (AfDB).
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BANKING

The International Islamic Trade Finance Corporation (ITFC) Maintains Leadership in Global Ranking of Islamic Syndications for 4 Consecutive Years

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The International Islamic Trade Finance Corporation (ITFC) Maintains Leadership in Global Ranking of Islamic Syndications for 4 Consecutive Years

The International Islamic Trade Finance Corporation (ITFC) Maintains Leadership in Global Ranking of Islamic Syndications for 4 Consecutive Years

The International Islamic Trade Finance Corporation (ITFC) (www.ITFC-IDB.org), a member of the Islamic Development Bank (IsDB), has reinforced its position as a key player in the Islamic syndications market, achieving prominent rankings in the 2024 Bloomberg and Refinitiv League tables.

The International Islamic Trade Finance Corporation (ITFC) Maintains Leadership in Global Ranking of Islamic Syndications for 4 Consecutive Years

The International Islamic Trade Finance Corporation (ITFC) Maintains Leadership in Global Ranking of Islamic Syndications for 4 Consecutive Years

For the fourth consecutive year, the ITFC top-tier performance reflects a strategic focus on delivering impactful trade finance solutions. For 2024, Refinitiv ranked ITFC as Globally # 1 Bookrunner and Mandated Lead Arranger (MLA) in their Islamic Syndications League table. Additionally, and Bloomberg also ranked ITFC among the top Bookrunners and MLA in the Islamic Syndications League table. These rankings are a testament to the ITFC ability to consistently deliver value-driven results and maintain a strong position among leading international and regional financial institutions.

The recognition from Refinitiv and Bloomberg confirms that ITFC is a key player in facilitating trade among OIC member countries. This not only reaffirms the ITFC status as the pre-eminent provider of trade solutions but also underscores its remarkable ability to draw investments from a wide spectrum of global investors and financial institutions.

Additionally, it emphasizes the positive impact on the lives and livelihood of people inherent in the ITFC business operating model, demonstrating its effectiveness in meeting the unique financial needs of OIC member countries.

The Refinitiv and Bloomberg League tables rank banks and financial institutions based on their performance in loan syndications, bonds, and mergers and acquisitions (M&A) transactions. The rankings, including arrangers, bookrunners, administrative agents, and advisors, are published quarterly and annually.

Distributed by APO Group on behalf of International Islamic Trade Finance Corporation (ITFC).
About the International Trade Finance Corporation (ITFC):
The International Islamic Trade Finance Corporation (ITFC) is a member of the Islamic Development Bank (IsDB) Group. It was established with the primary objective of advancing trade among OIC member countries, which would ultimately contribute to the overarching goal of improving socioeconomic conditions of the people across the world. Commencing operations in January 2008, ITFC has provided more than US$83 billion of financing to OIC member countries, making it the leading provider of trade solutions for these member countries’ needs. With a mission to become a catalyst for trade development for OIC member countries and beyond, the Corporation helps entities in member countries gain better access to trade finance and provides them with the necessary trade-related capacity building tools, which would enable them to successfully compete in the global market.
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BANKING

Network International appointed as Payment Processing Partner by MTN Group Fintech

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Network International appointed as Payment Processing Partner by MTN Group Fintech

Network International (Network) (www.Network.ae), a leading enabler of digital commerce across the Middle East and Africa (MEA), has been appointed as a Payment Processor – Issuing partner for MTN Group Fintech, Africa’s leading mobile financial services provider. This partnership marks a significant extension of Network’s portfolio of issuer processing collaborations throughout the African continent.

Network International appointed as Payment Processing Partner by MTN Group Fintech

Network International appointed as Payment Processing Partner by MTN Group Fintech

With a footprint spanning over 50 countries and serving over 250 financial institutions, Network International brings its expertise to this partnership which will enhance MTN Fintech’s cutting-edge mobile services and provide even greater value to stakeholders and customers across Africa.

The partnership will focus on rolling out card issuance products across key MTN Fintech markets, starting with Rwanda which is already operational. Soon   Uganda, Ivory Coast, and Nigeria will also be covered under this collaboration.  Network International will provide a comprehensive range of services, including transaction processing, card management and online fraud prevention. MTN Fintech users will benefit from a seamless experience accessing both traditional mobile services and innovative digital payment solutions.

Dr. Reda Helal, Group Managing Director – Processing, Africa and Co-Head Group Processing at Network International commented: “Our collaboration with MTN Group Fintech marks a major milestone for our outsourced payments services in Africa. It demonstrates our ability to successfully serve Mobile Network Operators (MNOs) via our fully-fledged processing solutions and our continued dedication and commitment to the African region. We are excited to support MTN Group Fintech’s growth strategy, and its business development plans across the continent.”  

Cedric N’guessan, Executive for Payment and E-commerce at MTN Group Fintech added, “This collaboration with Network International is pivotal in enhancing financial inclusion across Africa and beyond. It enables our customers to actively engage in the global economy, aligning perfectly with our strategic goals alongside Mastercard to broaden access to digital financial services across the continent.” Read More (https://apo-opa.co/43aKuII)

MTN Group provides voice, data, fintech, enterprise wholesale and API services to more than 288 million customers in 14 African markets.

Distributed by APO Group on behalf of Network International.
About MTN Group Fintech:
MTN Fintech, the platform business of MTN Group, is dedicated to revolutionising global financial services through innovative digital technology solutions. Leveraging MTN’s extensive reach and expertise in telecommunications, MTN Fintech is committed to advancing financial inclusion for all and empowering communities in Africa. With a primary focus on pioneering mobile financial services, digital payments, e-commerce, short-term insurance, and remittance capabilities, MTN Fintech strives to establish seamless, accessible, and secure financial ecosystems that shape the future of digital finance.

About Network International:
Network International is the Middle East and Africa’s largest and leading digital payments company. Our purpose is to help businesses and economies grow by simplifying payments and commerce. We operate in 50+ countries serving governments, banks, fintechs, merchants and public sector companies. We have 2,000+ employees based in our markets serving over 250 financial institutions and 130,000+ merchants.

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