Access to Finance Training Brings Down Barriers Between SMEs and Banks
When Building Markets launched its Access to Finance (A2F) program in Mozambique in early 2014, the team witnessed firsthand the difficulties small and medium-sized businesses (SMEs) faced when applying for financing. Nearly every business was interested in accessing new lines of formal credit, but the process was challenging, especially for first time borrowers. After meetings with banks, Building Markets found loan officers clearly interested in increasing the supply of their SME clientele. However, the quality of the loan applications they were receiving often did not meet standards so were therefore declined.
Applying for a loan as a small business in Mozambique can be daunting, which is one of the reasons there is a reliance on informal lending mechanisms. Complicated procedures, a lack of experience with financial models and documentation, and preparing for bank presentations and negotiations all requires access to resources and guidance that will enable success. Because this is often not available, even very capable SMEs continue to be excluded from Mozambique’s financial systems. Greater information about the loan application process, and personalized support, can go a long way to improving an SME’s application and loan approval.
To address this challenge, Building Markets launched its A2F training service in Mozambique which better prepares small businesses for all aspects of the credit cycle.
Over the course of the past four months, A2F training sessions have been held with over 170 participants that represent more than 90 SMEs. Each training has been tailored to the various needs of Building Markets’ SME clients. While some focused on financial documentation and business plans, others have focused on marketing, business relations, environmental sustainability, and strategic planning. Sessions are also offered specifically for female entrepreneurs to ensure curriculum meets their specific business needs and to allow for an open environment where they can exchange experiences and views. Because women play such a critical role in economic development, all participants are provided with guidance on the importance of Gender Equality in the workplace.
With each training, the staff have adapted presentation, approach, and pedagogy based on feedback gathered from trainee surveys. By presenting more specific case studies, drawing from the experiences of participants, and using more technology, post-training feedback has been increasingly positive. Of the first five training sessions, 73% of training participants reported being confident to apply for a loan after attending. Before and after self-assessment surveys (see table below) show that prior to training, the average participant rated their understanding of access to finance topics at 2.91 on average, on a scale of 1 to 5, with 5 representing perfect understanding. Upon completion of the training, the scores had increased to an average of 4.21.
Also included in these events are the government agency IPEME (the Institute for the Promotion of SMEs) and regional bank representatives. This creates an important opportunity for SMEs and financial stakeholders to engage and learn from one another.Aside from preparing SMEs to apply for credit, Building Markets training sessions work to provide participants with experiences where they are empowered to embrace their roles as entrepreneurs, innovators and agents of change in the development of their country.
As a new year begins, Building Markets will continue to provide training to local Mozambican businesses to help them access new lines of credit. For more information of Building Markets’ work in Mozambique, follow the team on Twitter @BuildingMoz.