Mozambique has enjoyed a decade of sustained economic growth and macroeconomic stability. However, this growth can largely be attributed to natural resource mega projects which have not had a significant impact on local income generation, employment creation, or economic diversification. As a result, poverty rates remain among the highest in the world, and job creation has not been able to meet the demands of the growing number of youth entering the job market each year.
Small and medium enterprises (SMEs) offer a significant opportunity and pathway out of poverty as they are responsible for 86% of new employment; however, in developing countries like Mozambique, a number of factors prevent SMEs from reaching their growth potential. This includes, for example, weak organizational capacity and financial barriers (i.e. access to capital, cash flow bottlenecks, and limited financial management).
To address this problem, Building Markets, with the generous support of Canada’s Department for Foreign Affairs, Trade and Development (DFATD), launched a new operation in Mozambique this year: Securing Access to Finance for Local Businesses. The program builds on pilot work undertaken in 2013 where Building Markets had success in facilitating more than $7m in loans.
On 22 April 2015, Building Markets held a formal launch event at the Avenida Hotel in Maputo which was attended by a diverse range of participants including business owners and their staff; representatives of NGOs, commercial banks; business development service providers; donor agencies; and business associations.
Also present were representatives of IPEME (the government agency responsible for the promotion of SMEs in Mozambique) and the First Secretary at the Canadian High Commission to Mozambique, Mr François-Philippe Dubé, representing DFATD.
Speaking on behalf of IPEME, Mr Ramatane Ernesto gave a brief overview of the problems SMEs face in Mozambique and the potential that the Building Markets project holds for this sector. He lamented the fact that despite accounting for approximately 24% of formal jobs in Mozambique, local SMEs do not receive adequate support to enable their further development. Access to markets and access to finance continued to be a challenge to obtain resulting in weak involvement of the sector in the economic transformation of the country. He expressed IPEME’s delight over its partnership with Building Markets and highlighted some of the problem areas which this partnership is expected to address, such as capacity building and credit advisory services.
Tarcísio Mahanhe, head of Credit at MozaBanco delivered a presentation that provided a synopsis of the Mozambican economy, where it is and where it was heading. As one of the fastest growing economies in the world, registering average GDP growth in excess of 7% during the last decade, Mozambique presents many opportunities for the business sector. He also pointed to the discovery of hydrocarbons in the north of the country as being a game changer and a unique opportunity for SMEs to increase their contribution. In light of these opportunities, he went on to provide an overview of his bank’s products targeting the SME sector, as well as plans for the future. He indicated that throughout its national footprint of 49 points of presence (32 branches, 12 corporate centres and 5 private banking suites), the bank had dedicated spaces and commercial managers for SMEs, to ensure high levels of service to the sector and to meet its day-to-day needs. A full range of products and services has been designed specifically targeting SMEs, such as cash management and transaction products (current and investment accounts, debit and credit cards), working capital facilities (overdrafts and trade finance products), financing of investments (term loans and leasing) and flexible banking (ATMs and on-line banking). He also highlighted preferential fee structures for SMEs as well as dedicated funding lines with lower interest rates, such as those funded by FECOP (Fundo Empresarial da Cooperação Portuguesa); USAID; PRSP (Plano de Relançamento do Sector Privado) and African Guarantee Fund.
Rounding off the presentations was Paulo Malengua, CEO of Minimus Limitada, an ICT business based in Maputo. Minimus was one of Building Markets’ first clients during the pilot phase of the project in 2013. He recounted how prior to his company’s involvement with Building Markets, he struggled to raise funding for their expansion. Building Markets’ assistance enabled them to access USD50,000 from BancABC which helped the company to start tendering for government contracts. Since then, the company has won several of those contracts, establishing it as one of government’s regular suppliers of ICT equipment.
Securing Access to Finance for Local Businesses in Mozambique will focus on the three most important economic hubs in Mozambique: Maputo, Tete, and Nampula, and will operate over an 18 month period. Key services include credit advisory, training, and catalytic financial services. Each of these services will have a separate angle targeting women owned/managed businesses.