Investment and access to finance key for Africa

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On Monday it was the Guardian, today it is the Financial Times where Kurt Hoffman, president of the Shell Foundation, criticizes current development efforts towards Africa and suggests where improvements need to be made: private sector development.

His emphasis is on access to finance, and that it needs to be improved. There is tons of money in Africa – the problem is that private SME entrepreneurs have little or no way of accessing it. The challenge is that in order for this to happen the business environment needs to be improved and the lending behavior of banks changed.

“Local African banks have to develop the confidence and the investment mechanisms to shift away from lending solely on the basis of a trading record with 100 per cent collateral. Instead, they need to begin providing finance secured against the entrepreneur's business plan and above all against a belief in the management team taking the investment forward.”


But how best to lower the risk perception of private capital? Much more than “aid alleviation” or “debt forgiveness” will be needed.

For more thoughts on this issue see the recent FT poll on “Is the US doing enough in Africa?” The many comments offered discuss far more than just the US role, and several of them are quite detailed and well thought out.

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