Cost of borrowing is high – AfCFTA Boss laments

Secretary General of the African Continental Free Trade Area (AfCFTA), Mr Wamkele Mene, has lamented the high cost of borrowing by the commercial banks in member countries with respect to Small and Medium scale Enterprises (SMEs).

Mr Mene stated that sovereign guarantees by governments are needed to enable SMEs thrive.

He explained that the issues are not about the lack of availability of funds to support SMEs.

Rather, he said, they have to do with risk mitigation.

“We are close in resolving that issue,” he told TV3’s Alfred Ocansey in an interview on the Business Focus.

“The cost of borrowing is of course high, and commercial banks, whatever rate they set it. I had a conversation with the CEO of one of the major commercial banks in Africa with 26 countries across the Africa continent. He said to me that they, this particular bank, they have thrived in trade finance portfolio, 100% repayment, no bad loans specifically for SMEs that are run by women, very impressive.

“The big challenge is, how do you have a cross jurisdiction trade financing facilities across 39 countries? We have ratified the AfCFTA, if you don’t have sovereign guarantees, that is what we are trying to work with at the moment,” he said.

He added “The risk mitigation factor, all of them we want to contribute to AFCFTA SME facility but there is a major issue of risk mitigation that has to be solved.

“It will take us three, four, five years to negotiate sovereign guarantees by governments.

“I think that in the conversations, my sense is not the lack of availability of funds, the issue is risk mitigation and who is going to bear the cost of risk if we want to have an AFCFTA SME fund. We are close in resolving that issue. I am hoping that next year we will be able to make the announcement to Africans.”

Source: 3news