ECA-SRO-SA supports development of financing model for MSMEs in Eswatini
The United Nations Economic Commission for Africa (ECA, Sub-Regional Office for Southern Africa (SRO-SA) convened to provide an integrated and inclusive platform for the development of an effective financing model that could address the needs and challenges of Micro Small and Medium Enterprises (MSMEs) in the Kingdom of Eswatini.
SRO-SA Officer in Charge, Sizo Mhlanga said: ''Lack of access to financial services is one of the key - if not the most important - barrier to the growth of MSMEs in the region and indeed the entire continent and Eswatini is no exception. The Government of the Kingdom of Eswatini, through the Ministry of Commerce, Industry and Trade (MCIT), requested technical support from ECA in developing an inclusive financing model to cater for the needs of MSMEs in the country. To address the issue, it is crucial to clearly understand the financing needs of MSMEs which will in turn help government, financiers, development partners and other private sector players to efficiently support the growth of the sector.''
The strategic importance of the MSME sector in the Kingdom of Eswatini is well recognized by the government, which has mainstreamed MSME development in its Vision 2022 and the National Development Strategy working in close collaboration with the United Nations family.
Nathalie Ndongo-Seh, UN Resident Coordinator, re-affirmed UN commitment to help the Eswatini government implement an effective financing model for MSMEs as a way to contribute significantly to, the achievement of the Sustainable Development Goals(SDGs) through economic growth and employment creation (SDG8); fostering innovation (SDG9); reducing waste through recycling (SDG12); poverty reduction (SDG1); food security (SDG2) and many other SDGs.
She recalled that in 2017, the UN declared the 27th of June to be observed as the Micro, Small and Medium-sized Enterprises Day. In its Resolution A/RES/71/279, the General Assembly recognized the need for Member States to focus on the importance of MSMEs in achieving the SDGs, particularly in promoting innovation, creativity and decent work for all.
Mr. Mluleki Sakhile Dlamini, Director, MSME (MCIT) presented an overview of the MSMEs’ favourable environment in Eswatini that allowed development of policies, regulatory frameworks and creation of support institutions. He explained that the MSMEs financing model would include a revolving fund, enactment of the Citizen Empowerment Bill expected to strengthen the framework for meaningful participation of citizens in high-impact enterprises and training in development programmes and government tax incentives.
He also pointed out that the Eswatini MSME strategy was to decentralize support institutions such as the Centre for Financial Inclusion (CFI), Small Enterprise Development Corporation (SEDCO) and the Eswatini Development Finance Corporation (FINCORP). CFI was an agency of the Ministry of Finance to co-ordinate the implementation of the National Financial Inclusion Strategy, it also facilitated access and usage of the affordable financial services and products particularly for the low-income groups and the un-banked population. While SEDCO was meant to facilitate access to finance through training, business plans, cash flow projections and business incubation, FINCORP provided similar services through access to credit for MSMEs, promoted development of Eswatini-owned enterprises and facilitated access to institutional development services.
According to Gcina Nxumalo from the Central Bank of Eswatini, the work of the above access-to- finance institutions was complemented by the Central Bank which operated a Small-Scale Enterprise Loan Guarantee Scheme (SSELGS), established in 1990 to help MSMEs obtain credit from commercial banks by guaranteeing the loans. He informed the meeting that the bank operated Export Credit Guarantee Scheme (ECGS), Small Scale Enterprise Loan Guarantee Scheme (SSELGS) and guarantees covered for risks associated with business loans.
The highlight of the session was the sharing of perspectives, experiences and challenges faced by various stakeholders, including financial institutions, business development funds, MSME organisations and individual enterprises such as Inhlanyelo Fund, Eswatini Bank, Federation of Eswatini Business Community (FESBC), Youth Enterprise Revolving Fund (YERF) and S’fundze Khaya Honey Producer. Some common problems included lack of education, grant syndrome and high collateral and threshold banking requirements. They all expressed hope that the financing model would respond to these hindrances and permit MSMEs have access to finance.
The project consultant, Mr. Vinaye Ancharaz indicated that MSMEs were indeed, an engine for inclusive growth not only in Eswatini but also for the entire SADC region. Their impact on employment, income and economic growth; their role in combatting poverty, reducing income and gender-based inequalities and building economic resilience; and the contribution they could make towards the Sustainable Development Goals (SDGs), were very substantial.