By Saio Marrah
With support from Africa Resilience Investment Accelerator (ARIA) and Invest Salone, Development Financial Institutions (DFIs) have pledged to support private investment in Sierra Leone with increased and more flexible financial lending to grow their businesses.
The support will happen by investing in the local financial institutions, which will in turn channel more loan opportunities to businesses in the country.
During a panel discussion held last week at the Freetown City Council Auditorium, there were conversations around how the DFIs can support Small and Medium Enterprises (SMEs) in accessing finance and technical assistance.
There were concerns raised by representatives of SMEs about the enormous challenges they face in accessing loans from local commercial banks. The challenges include short-term loans of not more than two years, high interest rates and collaterals that are unimaginable to get.
It was also underscored that 25 percent interest rate for loans is the normal rate across the commercial banks in the country.
Some of the banking regulations from the central bank were also highlighted as some of the impediments to access to finance.
Responding to a question about how the DFIs can unlock investment in the frontier market, Head of SMEs at Eco Bank, Mohamed Sowe, opted for the DFIs to support the local banks with capital, which will in turn increase and leverage small businesses’ access to loans.
After the panel discussion, Politico learnt from the Manager of British International Investment (BII) and Co-lead for ARIA initiative, Alex Kucharski that they are very committed to investing more in Sierra Leone and that through the ARIA initiative they are trying to support other investors to come and invest more in the country.
“So this event today was focused on how we can invest in financial institutions specifically as a way to channel capital to small businesses where we can’t reach them directly. So we have been discussing how banks and micro financial institutions can expand their lending to support more businesses in Sierra Leone,” he said.
Kucharski also pointed out that one of their colleagues, International Finance Corporation (IFC) , has already made an investment and provided technical assistance to one of the local financial institutions.
He said with a partnership between ARIA and Invest Salone, they have also started providing more technical assistance and expertise to financial institutions in the country so that more businesses can get capital from the financial institutions.
Kucharski further noted that the ARIA initiative is focusing on four other African countries-Liberia, Benin, Democratic Republic of Congo and Ethiopia, and they have made excellent progress in Sierra Leone and are exploring lots of opportunities.
Kucharski said they are trying to ensure the other countries catch up, but that Sierra Leone is the front runner.
He also talked about how they and other DFIs are working on and exploring other new investments in the country through government and other businesses in Sierra Leone.
Responding to a question on when Sierra Leone will realise the gains from the programme, he said BII had already invested 115 Million Dollars of commitment into Sierra Leone over the last 12 years, IFC had invested even more, and that the U.S. International Development Finance Corporation (DFC) had also invested a significant amount.
Christian-Clark Lowes of Invest Salone noted that it is a private sector programme funded by the UK government with a mandate to attract investments and support export from Sierra Leone and that they are also working with businesses to increase their competitiveness.
She said they are working with ARIA that brings 16 DFIs together to mobilise investment into frontier markets like Sierra Leone.
She said they serve as a bridge between the DFIs and the local businesses to create a balance and that they also work with the businesses directly to increase their attractiveness for the investors so that they can present themselves better.
Ms. Lowes said this visit by the BII is in direct response to the previous visits into the country via the ARIA initiative, of which the BII is a member.
She said the partnership between the DFIs and the local financial institutions is to increase lending to the private sector. She said that can only be achieved if they support the financial institutions.
As the current lending procedure to the private sector is too restrictive with high interest rates, the project will come in for the local financial institutions to change their systems, processes, procedures and products to adjust to the needs of the businesses.
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