Making Africa’s SMEs accessible to global investment: Unlocking growth and opportunity

By Ramat Ebella WHAJAH 

Small and Medium Enterprises (SMEs) are the lifeblood of Africa’s economy, yet they remain largely excluded from global investment opportunities.

In Ghana and across the continent, SMEs make up approximately 90percent of businesses and contribute between 40-60percent of GDP, yet they struggle to scale due to limited access to capital, weak market linkages, and regulatory hurdles.

Despite their economic significance, global investors continue to favor high-value corporations over SMEs, perpetuating financial exclusion and stunting economic growth.

With the right strategies, Africa’s SMEs can be positioned as lucrative investment opportunities that drive job creation, innovation, and sustainable development.

This article explores the barriers that limit SME access to global capital, the potential for transformation, and the steps required to bridge the investment gap.

The current landscape of SMEs in Ghana and Africa

The economic contribution of SMEs

• SMEs contribute between 70-80percent of employment in Africa, providing livelihoods for millions.
• Africa has over 44 million micro, small, and medium-sized enterprises (MSMEs), yet less than 20percent have access to formal financing.
• The International Finance Corporation (IFC) estimates the SME financing gap in Sub-Saharan Africa at US$331 billion.
• In Ghana, SMEs account for 92percent of businesses and employ nearly 85percent of the workforce, yet most struggle to expand beyond local markets.

While these statistics highlight the dominance of SMEs, they also reveal systemic barriers preventing these businesses from accessing critical funding to scale.

Challenges preventing African SMEs from attracting global investment

1. Limited access to financing

Most African SMEs depend on local banks, which impose high collateral requirements and exorbitant interest rates. Many banks categorize SMEs as high-risk, limiting their lending capacity. This forces SMEs to rely on informal lenders with even higher interest rates, restricting their ability to scale.

2. Investor perception and trust issues

Global investors often hesitate to invest in African SMEs due to concerns about:

• Inconsistent financial records and weak corporate governance.
• Economic and political instability affecting business sustainability.
• Lack of reliable data to assess SME growth potential.

3. Bureaucratic and regulatory constraints

• Complex business registration processes, excessive taxation, and lack of policy consistency deter global investors.
• Weak enforcement of contract laws and intellectual property rights discourage investment in innovative SMEs.

4. Poor access to global markets and supply chains

• Many SMEs lack the infrastructure and knowledge to tap into export markets.
• Limited exposure to international trade fairs and investment summits reduces their visibility.

5. Low digital adoption and technological gaps

• Most SMEs still operate manually, lacking digital tools for financial transparency, customer engagement, and scalability.
• Limited internet penetration and digital literacy affect the adoption of e-commerce and fintech solutions, which are key to attracting investors.

Opportunities for making African SMEs investment-ready

1. Leveraging Africa’s consumer market

With a population of over 1.4 billion and a projected consumer spending of US$6.7 trillion by 2030, Africa presents a massive investment opportunity. SMEs in agriculture, fintech, health tech, and renewable energy have the potential to attract substantial foreign investment.

2. African Continental Free Trade Area (AfCFTA)

• AfCFTA creates a single market of US$3.4 trillion, allowing SMEs to scale beyond their borders.
• By eliminating trade barriers, AfCFTA makes it easier for investors to fund SMEs with cross-border expansion potential.

3. Growing interest in impact and ESG investments

• Global investors are increasingly shifting towards sustainable and impact-driven investments.
• African SMEs involved in climate tech, green energy, and social enterprises have the potential to attract funding from impact investors and development finance institutions.

4. Venture capital and private equity interest in africa

• African startups raised over US$5 billion in venture capital funding in 2021, showcasing investor confidence in tech-driven SMEs.
• Fintech, agritech, and e-commerce SMEs are emerging as key areas for foreign direct investment (FDI).

5. Digital transformation and fintech revolution

• The rise of mobile banking, blockchain, and AI-driven credit scoring enhances financial inclusion and SME visibility.
• Digital platforms provide alternative credit data to assess SME viability, making them more attractive to investors.

Strategies to bridge the investment gap for African SMEs

1. Strengthening SME financial transparency and governance

• SMEs must adopt proper accounting practices and audited financial statements to boost investor confidence.
• Implementing corporate governance training for SME owners will improve their investment readiness.

2. Enhancing Public-Private Partnerships (PPPs)

• Governments should collaborate with international investors to create credit guarantee schemes that de-risk SME lending.
• Tax incentives and investment-friendly policies will attract foreign capital.

3. Digitalization and e-commerce adoption

• SMEs must embrace digital payment systems, e-commerce, and fintech solutions to enhance global competitiveness.
• Governments should support digital literacy programs to help SMEs transition into the digital economy.

4. Facilitating SME access to global markets

• Governments should simplify export regulations and provide incentives for SMEs venturing into international markets.
• SME participation in global trade fairs, B2B networking events, and online investment summits should be encouraged.

5. Expanding alternative financing options

• Development finance institutions should establish SME-focused investment funds.
• Governments and private sector players should promote crowdfunding, angel investing, and peer-to-peer lending.
• African stock exchanges should create SME-friendly listing requirements to facilitate equity investment.

Case Studies: Successful SME investment stories in Africa

1. Flutterwave (Nigeria) – Fintech Success – Flutterwave, a Nigerian fintech startup, secured US$250 million in Series D funding, demonstrating Africa’s digital economy potential. The company’s scalable business model and regulatory compliance made it attractive to global investors.
2. M-KOPA (Kenya) – Solar Energy SME – M-KOPA, a solar energy SME, attracted US$190 million in investment, highlighting the viability of impact-driven SMEs.
3. Zeepay (Ghana) – Mobile Money Expansion – Zeepay, a Ghanaian fintech firm, secured multiple rounds of funding by leveraging Africa’s growing mobile money adoption.

Conclusion: Unlocking Africa’s SME investment potential

For African SMEs to attract global investment, a multi-faceted approach is necessary:

1. Governments must implement investor-friendly policies and strengthen financial transparency.
2. SMEs must embrace digitalization, corporate governance, and global market integration.
3. Investors should recognize Africa’s untapped potential in fintech, agribusiness, renewable energy, and impact-driven enterprises.

By addressing these challenges and leveraging emerging opportunities, Africa’s SMEs can become the next frontier for global investment, unlocking sustainable economic growth and prosperity for millions. The time to act is now!

>>>the writer is Head, Accra Tema Zone, National Investment Bank with over a decade experience in Business Advisory, Sales, Customer Service, Branch Operations among others. She is the Founder of Girls with Purpose Foundation, a not-for-profit community passionate about mentoring young girls and the youth to find their purpose, standout and succeed. Connect with Ramat via LinkedIn: Ramat Ebella Whajah , Email: [email protected]

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