Missing middle still problem in financing

The "missing middle" remains key problem in financing small companies in developing countries. Most SMEs in African countries are constrained by finance difficulties and do not have access to the finance they need.

The "missing middle" remains key problem in financing small companies in developing countries. SMEs are the backbone of developing countries’ economies and the main potential source of formal employment. Africa needs 15 million new jobs per year.

However, financial exclusion is widespread in Africa where 2.7 billion adults have no access to financial services. Most SMEs in low-income countries are constrained by finance difficulties and do not have access to the finance they need, especially at the early stage of their development and in the ‘missing middle’ phase of expanding SMEs.

Alongside appropriate finance, SMEs in developing countries need infrastructure. There is a lack of basic facilities in many developing countries such as transport, electricity, water, etc.

The capacity of local banks needs to be addressed. The north needs to reinforce the capacity of banks to outreach to SMEs – deal with clients they are not used to dealing with. And though the availability of microfinance is expanding, it does not reach the bulk of SMEs.

Published on 1 March 2011