SME Finance in Africa

This paper uses cross-country firm-level surveys to gauge access to financial services and the importance of financing constraints for African enterprises. It provides a comparison of access to finance in Africa and other developing regions within the continent, around the world, and across different groups of firms. Based on regression analysis, the paper relates firms’ access to finance to an array of firm and country characteristics and estimates whether these relationships are different inside and outside Africa. In addition, it also discusses several persistent and new challenges for SME finance. The paper covers the following sections in detail:

• Review of relevant literature;
• Descriptive evidence on firms’ access to financial services inside and outside Africa, size gap in corporate finance, and the importance of financing constraints;
• Regression analysis with a focus on country covariates of access to credit and differential effects inside and outside Africa;
• Policy challenges and recommendations for improving access to finance for SMEs operating in the region.