Africa: Micro-finance in emerging economies

October 12, 2017

The emerging economies of Africa are overly dynamic and brag a great deal of potential. With all the opportunities and prospects in flow, the economic scene in Africa has been a sensitive one- dealing with concerns like poor capital accumulation and inefficiency of key institutions. Solutions to deal with them have always been a matter of debate; and likewise, micro financing is a vital aspect to study. Strictly speaking, micro financing is a bunch of financial services which targets low-income clients. Women are the most viable part of the so-called low-income clients- making it more appropriate for the African region.  Owing to the nature of the clients, the products also tend to be lower in monetary value- but again impacting the day to day economic life of an average African community.

Small size business…

The private sector in Africa is concentrated with small to medium size firms. Their access to capital hence faces serious obstacles which in turn lead to their limited success, let alone any reasonable growth.  Having said this, microfinance in Africa is showing the potential to grow in three distinct stage-micro, meso and macro. More and more banks, private investors are gearing up for this.

Fighting obstacles

African economies need to battle the challenges that hold back microfinance to grow fearlessly. Structural inefficacies regarding administration, internal management and financial sustainability are the most prominent challenges. Portfolio management and better allocation of human resources has been dealt with somehow. In addition, records and data collection regarding micro finance needs improvement to facilitate better growth and tackling challenges.  Leal framework in Africa also posses room to accommodate micro financing- at least at the macro level.To conclude, micro financing holds the potential to power-dive the emerging economies of Africa. With heaps of small to medium-sized firms on the scene, micro financing is the need of hour. 

 

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