Capital Is Not Africa's SME Financing Problem, ASEN Chief Argues

Africa's social enterprises do not fail to attract finance because money is scarce, argues Isaac Aggrey, CEO of the African Social Entrepreneurs Network (ASEN). The problem, he writes in an essay published by Business Fights Poverty, is that enterprises are often not investment-ready, financial products do not match their circumstances, and businesses cannot reach reliable markets.

That is a pointed reframing of a debate usually dominated by talk of a financing gap. Aggrey names five levers he considers critical: investment readiness, appropriate finance, risk-sharing, market access and impact measurement. Each, he argues, requires coordinated action from entrepreneurs, financial institutions, investors, development partners and policymakers. What he does not do is quantify any of it — the essay contains no figures on the size of the gap or the volume of capital needed.

Who owns the readiness problem?

Investment readiness is typically framed as the entrepreneur's job alone. Businesses need sound financial records, clear governance, realistic plans, evidence of demand and a credible growth strategy, Aggrey acknowledges. But many early-stage and community-based enterprises cannot access the expertise needed to build those systems.

His proposed fix: practical, affordable business-development support tied to real financing pathways — mentoring, bookkeeping help, financial management training, governance advice and support preparing investment proposals. Notably, he rules out lowering standards. The goal, he writes, is to help enterprises meet appropriate standards, judged by evidence suited to the business's size, sector and stage of development. The caveat is implicit: readiness support without a financing route at the end changes little.

Why well-run businesses still get rejected

Even a well-managed business may be unable to use a financing product that does not match its cash flow or operating model, Aggrey writes. Conventional lending requirements — collateral and lengthy credit histories — are difficult for small enterprises to meet. Women-owned businesses and enterprises in informal or underserved markets face additional barriers.

He calls for financing matched to the purpose and capacity of the enterprise: working-capital loans, purchase-order finance, guarantees, equity, quasi-equity or other structured instruments, depending on cash-flow patterns, customer contracts, repayment capacity and the time needed for returns. The objective is responsible finance — capital that grows a business without placing it under unsustainable repayment pressure. That is a standard developers invoke often; whether lenders will restructure products around it remains the open question.

Where risk-sharing already works

The essay's most concrete element is a live example. In 2024, the International Finance Corporation (IFC) and Access Bank Ghana announced a partnership to support SME financing, including women-owned businesses, through a risk-sharing facility. For Aggrey, it shows how development finance institutions and local banks can expand access together.

He is careful with the limits. Risk-sharing, he writes, is not a substitute for sound credit decisions or viable business models. It works best when participating institutions clearly define eligible borrowers, maintain underwriting standards, monitor results and learn from portfolio performance. The purpose is to share and manage risk more effectively — not to remove accountability.

Can a loan alone deliver growth?

Finance does not guarantee growth, Aggrey argues. Enterprises also need customers, reliable suppliers, suitable technology, skills and access to larger value chains. A business that receives a loan but cannot secure orders or manage operations may struggle to repay it and sustain its impact.

His prescription: connect financial support with mentoring, digital skills, product development, quality assurance, financial management and market intelligence. Buyers and larger companies, he adds, can contribute through supplier-development programmes, transparent procurement and partnerships on quality and delivery requirements. These links matter most for women-led businesses and social enterprises trying to move from local markets into larger domestic or regional opportunities.

Measuring impact without drowning in it

Social enterprises are expected to deliver value beyond financial returns, but impact ambitions must be supported by evidence, Aggrey writes. Businesses and funders should agree a proportionate set of indicators covering both commercial sustainability and intended outcomes — revenue growth, business survival, jobs created and retained, quality of employment, women's ownership or leadership, and the reach or affordability of essential products and services.

Reporting, he warns, should be useful for decision-making rather than an administrative burden that diverts scarce resources from running the business. Tracking financial and social performance together helps entrepreneurs improve models and helps investors direct support where it works.

The so-what

ASEN's argument reduces to this: capital flows when the ecosystem around the enterprise — readiness support, appropriate products, risk-sharing, market links and credible measurement — is built in parallel. Aggrey's collaboration pitch is coherent, though the essay leaves the hardest questions unanswered: who funds the readiness infrastructure, and at what scale. The IFC-Access Bank Ghana facility suggests the model can work; whether it can be replicated widely enough to shift the continent's SME financing picture is the test ahead.