Beyond finance: The holistic approach of SME development through capacity building

Micro, Small and Medium-scale enterprises (MSMEs) play a key role in driving economic development, job creation, environmental sustainability, and financial inclusion.

This, according to the World Bank, makes MSME development a foremost priority for many governments around the world. In emerging markets such as Ghana, the MSME ecosystem reportedly generates at least seven out of ten formal jobs. Despite this, the limited availability of funding continues to impede the expansion of this sector and is frequently reported as the second major barrier for MSMEs.

The African Development Bank posits that 85% of enterprises in Ghana are SMEs, yet recent studies suggest that most MSMEs are failing to be competitive, survive, or grow. Compared to larger firms, small businesses struggle to get bank loans because of insufficient registration paperwork, inactive business accounts, and a history of poor cash flow.

Within this dynamic landscape of Micro, Small and Medium Enterprises, subsidised lending interventions have emerged as a crucial catalyst for economic growth. The Absa Young Africa Works loan at 10% is an innovative solution co-created by Absa Bank Ghana and the Mastercard Foundation in October 2020 to unlock capital for small businesses in Ghana. Nevertheless, the intervention’s true potential and impact extend beyond financial assistance to encompass the holistic development of MSMEs. This involves strategic training and business development opportunities, empowering them to expand and contribute to the growing Ghanaian workforce. Over three years have passed since the establishment of the Absa Young Africa Works initiative, during which 6,466 MSMEs, including smallholder farmers, have been offered tangible prospects for business growth. But what does this mean for the future of these businesses?

Enhancing Operational Efficiency and Resilience

Access to finance allows businesses to achieve stable operations and growth, essential for long-term profitability and job creation. This potential amplifies when businesses combine working capital with effective business management practices. Consequently, the professional growth of entrepreneurs remains a key area of focus for the Absa Young Africa Works project. Capacity-building for businesses and entrepreneurs must be viewed as a continuum of activities that traverse direct-to-participant training sessions. The Absa Young Africa Works approach to business development focuses on bridging knowledge gaps and equipping entrepreneurs with skills in key areas including financial management, business strategy, operations, and workforce management, while intersecting direct training activities with learning trips, incubation, handholding, and mentoring engagements. This integration allows for a more complete method of identifying, analysing, and resolving business obstacles.

In October 2023, the Business Acceleration and Sustainability Training programme implemented in partnership with AngloGold Ashanti and the training agency, Empretec, focused on micro and small businesses to capacitate them with entrepreneurial and business management skills with the aim that they will grow their businesses and position themselves to better serve the gold-mining community in the Ashanti region.

“I attended the Absa Young Africa Works SME training programme in 2021 and 2022. training proved insightful and helped me introduce new packaging for my fish powder products. In 2023, I began to supply big supermarkets and shopping malls which has resulted in increased sales” – Irene Adafia (CEO, Sadarut Foods)

Fifty small and medium-sized enterprises (SMEs) in the mining municipality of Obuasi, in the Ashanti region, were beneficiaries of a comprehensive business forum. They received training and embarked on a three-day learning trip to larger enterprises within Greater Accra. During this trip, they had the valuable opportunity to engage with business executives and gather ideas to enhance and expand their own businesses. The Absa Young Africa Works FINTECH initiative targeted 150 MSMEs utilising financial and Agric-technology to provide essential services to other businesses and consumers. In 2023, the FINTECH initiative conducted a pitching competition and provided funding of up to GHC250,000 to ten businesses. These businesses have proceeded to acquire essential operational resources, such as vehicles, while also expanding their workforce and extending the scope of their logistical and territorial operations. The training program has empowered 2,605 farmers with knowledge in modern farming techniques and effective money management. These farmers have transitioned from peasant farming to adopt farming as a business, thanks to our efforts. Building cross-country, sub-regional and continental businesses, as well as resilient economies requires investments of this nature.

Addressing Youth Unemployment

Thirty-eight percent of Ghana’s population comprises young people aged 18-35, 25% of whom are not in employment or education according to UNDP. Despite the nationwide surge in school enrolment and literacy rates, education alone cannot address the problem of unemployment. According to the Ghana Statistical Service, unemployment rates increased by 14.6% between 2022 and 2023. Nearly 23% of those unemployed in 2023 had completed tertiary education, and 77% were youth. Thinking about how we address youth unemployment requires an intentional shift to focus on MSMEs. In the past three years, the Absa Young Africa Works project has facilitated the creation of 1,742 jobs by providing training and support, as well as reduced interest loans, to less than 5% of MSMEs. This indicates the potential impact that MSMEs can have on unemployment issues in Ghana. Business owners leveraged knowledge on employee motivation gained from our trainings, and with the financial support received from Absa Bank, increased employee wages by an average of 17%. Medium-sized businesses went above the average, increasing employee wages by as much as 28%. This intervention continues to exhibit strategies necessary for engaging and ensuring their motivation towards securing and staying in decent employment.

Promoting Equity, Inclusion, and Sustainability

The support and intentional creation of opportunities for women-owned businesses to thrive is a crucial economic necessity, as it serves as an effective strategy to promote financial inclusion for women and address gender inequality and inequities in women’s participation and leadership in SMEs. To acknowledge this, we have included more women-owned businesses in different capacity-building opportunities. Since the commencement of the Absa Young Africa Works project in October 2020, the proportion of women-led businesses among all trained MSMEs has been 63%. Focusing capacity-building efforts on women businesses is also a step towards our deepened commitment to social and environmental objectives.

“At a point, I realized that what my business needed was very sharp inventory management and records. We deal in home and cooking ware, and without accurate record-keeping and stocktaking, keeping track was difficult. Thanks to the Absa Young Africa Works project, I have learnt a lot and have since been running my business efficiently”- Portia Seraphim (CEO, C.B Seraphim Dept Store).

According to the United Nations Industrial Development Organization, women are less likely to emphasise economic goals over social goals, showing that they have a higher social and environmental orientation compared to their male counterparts. In 2023, more jobs were created by women-owned businesses supported by the Absa Young Africa Works project. Our mentoring programme, instituted in January 2024, is targeting 24 MSMEs, 20 of which are women-owned.

“I am really struggling with records keeping. So, when I heard the mentor speak about records keeping, I realized there is a lot I have to learn from there. And I personally love branding, but I’m struggling to get the kind of branding I want. I have 3 branches; how can I get my team to get to know the brand I want and run with it? I think my mentor Nana Yaa will be helping a lot in this area” ~ Salma Owureku Owusu (CEO, Saljays Bookshop, Accra)

Nurturing Business Networking for Shared Growth

Through several organized training programs, the Absa Young Africa Works project has facilitated business networking and fostered a strong sense of community among MSMEs. These collaborative cycles have yielded results for many businesses.

To illustrate, Treasure Energy, one beneficiary of our SME capacity-building program, discovered an opportunity to acquire cost-effective armoured electrical cables for their business signage installation by networking with HK Electricals during a training session.

Treasure Energy now makes significant cost savings and continues to produce signages to serve other small businesses. The learnings obtained during this implementation period vividly demonstrate the crucial connection between capacity building and development outcomes.

These outcomes encompass improving operational efficiency and resilience of SMEs, creating sustainable employment opportunities, fostering equity and inclusion, and expanding networking opportunities for business owners. Financing may be the engine driving SMEs forward, but capacity building is the fuel that ensures long-term resilience. It is imperative to embrace this comprehensive approach, allocating resources to enhance skills and empower SMEs, enabling them to not only survive but also prosper in a constantly changing socio-economic environment.

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