“Africa has a lot of potential. But it remains only as potential if we do nothing. The supply chain has possibilities.” – Vimal Shah during the recently concluded Barclays Africa Forum.
African renaissance – with an economy that is on the rise, the need for capital support for entrepreneurs couldn’t be greater. According to Peter Matlare, Deputy Group CEO/CEO Rest of Africa, Barclays Africa Group Limited, Africa has approximately 50million SMEs, out of which only 20% have access to capital. This trend requires to be reversed, if the promise of the renaissance is to be realized.
Barclays has recognized that as the economy grows, so does Barclays. Corporates and SMEs need for capital support is increasing and Barclays sees itself as an enabler for business, in terms of access to capital, markets, and business support for transaction processing, etc. The traditional “collaterised” lending model no longer works, and Barclays is in the forefront to create emerging models whereby support for business is on the basis of cash-flows, and unique supply chain requirements of the entrepreneur. This new model in itself has inherent risks which traditional bankers in emerging markets often are hesitant to entertain.
Related; Barclays Africa Group Holds Pioneer Forum On Emerging Issues
At the recent Nairobi held Barclays Africa Forum, a panel on ‘emerging trends in supply chain developments’ addressed by among others Karim Dostmohammed, CEO Frigoken Limited, a part of the Aga Khan Development Network, Vimal Shah, CEO, Bidco Africa Limited and KeaObaka Mahuma, Head of Enterprise Supply Chain Development, Barclays Africa Group Limited, led participants in discussing various business support initiatives across the supply chain. For example, Frigoken has a network of 70,000 small scale farmers, whose need for capital cannot be based on the traditional collateral based model. With an aggregated annual production of over 20,000 Tonnes of produce, the individual farmer receives quality inputs, is guaranteed steady prices that do not fluctuate with seasons and access to markets for their entire production. Bidco Africa on its part has an extensive network of contract farmers made up of out-growers, distributors, transporters and retailers. In the traditional model, each of these supply chain participants will require collateral at each stage, yet the end product is one.
De-risking the model:
In the new model, the entire supply chain is viewed holistically and the cash-flows determined. Consequently capital and capacity enhancers, e.g. technology, etc can be availed to the producer, all determined on the basis of their known output. The catch word is integration and hence the players receive appropriate support, with the finance provider not undertaking excessive risk.
This innovative model hence relies on collaboration and partnerships and enhanced competitiveness.
In 2015 Barclays Kenya announced a KES 30Bn SME fund essentially geared to support SMEs in their funding requirements. ‘One of the major complaints by SMEs is that banks always require collateral in order for them to advance you money,’ according to Jeremy Awori, Barclays Bank of Kenya Managing Director. ‘We are now offering such customers unsecured loans of up to KES 6 million in a maximum of five years. Customers do not need audited accounts, just bank statements dating back six months and a clean credit history,’ said Mr Awori at the briefing.
