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As a bank that is fully committed to sustainable development in Africa, Société Générale has made small business develop- ment a major strategic focus as part of its Grow with Africa initiative. It has done this in terms of financing, by increasing its African SME loanbook by 60% in five years, but also by helping business projects to struc- ture more effectively. The informal nature of African businesses can make lenders such as banks reluctant to provide financing (absence of a legal entity or a set of financial statements, for example). Structuring SMEs so they are able to submit solid loan applications is a key part of this whole process.
As Aissatou Rassoul Gueye, Head of SME operations in Société Générale Senegal explains, “many support structures participate in the business ecosystem. We are convinced that a multidimensional financial and non-financial approach, in liaison with international players and local business development experts, helps to remove the main obstacles to creating and grow- ing businesses.” He adds that “Société Générale Group has also set up structures tasked with providing just such support to SMEs, regardless of whether they are customers or not. These structures are known as “Maisons de la PME" (SME centres). This concept is a concrete step in monitoring and financing SMEs. As well as international partnerships (with AFD Group, Bpifrance, Investisseurs & Partenaires, Réseau Entreprendre, etc.), local partnerships (with ADEPME, APIX, Bureau de mise à niveau [local standards office], etc.) are also being forged. These provide accounting and technical know-how (business plans, HR, digitisation, etc.) and legal expertise through advice, training and monitor- ing. At the same time, Société Générale teams analyse the most appropriate financing solutions for the businesses it partners through all stages in their development. So far, eight Maisons de la PME are up and running in Benin, Burkina Faso, Cameroon, Côte d’Ivoire, Ghana, Guinea, Madagascar and Senegal and a ninth is due to open soon in Mozambique.
SMEs wishing to invest and grow need smooth simple loan application processes and quick replies. Banks must help business people to clearly formulate their requests and demonstrate how the investment will boost their business’s development. They must also adapt to the SME’s everyday reality and come up with alternative ways of measuring credit risk.
Financing requirements can be dealt with by traditional products and services. Short- term facilities may be used to cover occasional liquidity shortages and medium- and long-term borrowings for bigger investments.
But other, lesser-known solutions such as leasing may be availed of for more specific needs. Lease arrangements exist for most types of pro- fessional equipment (transportation vehicles, industrial equipment, earthmoving machinery, office equipment, etc.). Factoring is another solution that may be used both for pre-financing receivables as soon as they are billed and for securing payment (guarantee against bad debts). We should also mention reverse factoring, which can be used by companies seeking low-interest, pre-financing arrangements and more effective receivables management, as well as various dif- ferent tailored products and services. Adapting the existing financial system to the realities of SMEs is absolutely essential. It is all about providing financing solutions that are not based solely on the company's balance sheet, but on a transactional financing approach, coupled with an analysis of the company’s business environment and performance risk. As Marc Giugni, Deputy CEO of Société Générale Côte d'Ivoire (SGCI) explains, “SGCI has adopted this approach by developing a dedicated financing "Product Program". The programme currently has four transactional financing products cover- ing operating requirements and it will soon be adapted to include investment-related needs.” Whenever possible, the provision of a guar- antee is an important element for backing up a loan application. Marc Giugni adds that, “our desire to scale up financing of SMEs is also driven by partnerships with development finance insti- tutions (DFIs) as a means of benefiting from risk sharing guarantees”. AFD Group partners many businesses through guarantees provided by Proparco. Indeed, for over ten years, Société Générale has been one of the chief beneficiaries of the ARIZ risk-sharing arrangement to develop corporate financing in Africa and, against the backdrop of the Covid-19 pandemic, we were the first bank to roll out Proparco’s Résilience guarantee.
One feature of African businesses is their low equity base. It would therefore seem expedient to forge more partnerships with Panafrican or national public investment funds to enable small businesses with ambitious expansion plans to deploy these plans using equity financing. The digitisation of flows also plays a key role in business development and has assumed even greater importance during the current pandemic. Banks need to be able to provide cus- tomers with effective and innovative solutions for managing their accounts, making inward and outward payments and paying salaries remotely. Remote banking applications are automating certain operations and making businesses more autonomous, reactive and efficient. Mohamed Nazim Bessaih, Head of Société Générale Algeria’s business enterprise network, explains that, “to take customer-sup- plier relations to the next level, we have launched a new B2B payment solution. Businesses can use a mobile app to manage transactions with their partner distributors securely and in real time.” At the same time, in certain African countries, YUP, a Group subsidiary, allows businesses to pay its suppliers and employ- ees – regardless of whether they have bank accounts – using mobile money. An increasing portion of business is now conducted internationally and this requires solu- tions for safeguarding international cash flows. For example, as Mohamed Nazim Bessaih points out, “the Algerian market is booming and this creates new possibilities for SMEs. Therefore, in 2020, we began providing forward currency contracts that help insulate import-export busi- nesses against FX risk.” Lastly, African women are among the world’s most enterprising: almost a quarter set up their own businesses and they produce nearly 65% of the continent’s goods. However, only a small minority have access to the financial services they need to grow their projects. It is therefore essential to support these women and help Afri- can small businesses to take off. This is why we have chosen to support female entrepreneur programmes such as WIA 54 sponsored by the Women in Africa foundation. So, are women the future of African enterprise?
