Why it is difficult for SMEs in Africa to get loans

June 22, 2020
Why it is difficult for SMEs in Africa to get loans

After interviewing lenders in different segments and check-sizes in Accra the JidiTrust team found out something really interesting that is pivotal to the general perception of loan applications in Africa for small businesses.

A lot of small businesses find it difficult to get loans, this is caused by a lot of reasons but after having conversations with the lenders we realised something we did not quickly see earlier on when we started out.

A large portion of the small business owners do not keep records (of sales and of their daily transactions), this is so important as it makes it so hard for lenders to evaluate key things they need to know about a business before releasing a line of credit.

One important question lenders must answer before issuing credit is will they be able to pay back? This question can only be answered if there is a clear understanding of the financial status and cash flow of a business. These can only be determined by sales and transaction records and that is one of the reasons why a lot of SMEs are not attractive target market for lenders.