Bringing global finance to small businesses: Facilitating SMEs in West Africa through impact investment funds.

• Author: Thiaw, Ndeye

Fledgling businesses in Francophone West Africa need nothing so much as access to financing in order to grow and thrive. Their problem in many cases is twofold: finding a knowledgeable, affordable source while wading into unfamiliar loan and credit processes. Local banking procedures might be opaque or strewn with red tape, while accountability and collateral demands create new headaches for managers struggling under their day-today workload.

Meanwhile, those reviewing applications from small and medium-sized enterprises (SMEs) in the region face a daunting task to identify worthy prospects by traditional means. It's hard to find SMEs with established credit profiles. High default rates and uneven record-keeping are the general state of play. Data on the condition of local markets and comparable businesses might be spotty or non-existent, making decisions more difficult and time-consuming.

Put the two together and the results are nothing short of dismal. Just 1% of applicants win approval and 80% of new businesses in the region fail within the first five years. Potential angel or green investors could be forgiven for shying away, while entrepreneur pitches could fall on deaf ears no matter how economically stimulating or environmentally sustainable they are.

The solution, as we see it at Brightmore Capital, is making the process more transparent at both ends of the financing process while delivering an outcome that generates growth and conforms with the United Nations Sustainable Development Goals (SDGs). We've identified eight specific SDGs likely to align with our intended targets:

Our investments--in at least a dozen companies--will be made across the economic spectrum, including the agricultural and food value chain; financial inclusion; renewables and clean technologies; and essential services. We want to nurture high-potential SMEs and start-ups with the end goal of transforming them into effective enterprises in a region with a growing base of 130 million low- to middle-income consumers.

However, intentions won't translate into success without proper tools. Developing customized applications can simplify due diligence, bypassing the business-plan model. Local incubators, agencies and trade and investment support institutions (TISIs) can offer workshops on standards, best practises and investment readiness. A tracking system could provide early-stage data to identify leads...