MSMEs Set to Shape Africa’s Jobs Future

By ABN Staff 19 hours ago

MSMEs Set to Shape Africa’s Jobs Future

By Ethiopis Tafara

In an industrial zone on the outskirts of Abidjan, a small food processing company employs 28 young people. Demand is strong. Suppliers are reliable. Orders keep coming in.

Yet for years, growth stalled.

The problem was not ambition. It was financing. The business struggled with short-term loans and rigid collateral requirements that did not reflect how it operated. Once it accessed financing tailored to its needs, everything changed. Within two years, the company doubled its workforce.

That story is not unique. It reflects a much larger reality across Africa.

A Defining Moment for Jobs

Over the next three decades, Africa will add about 740 million people to its working-age population. This presents a major opportunity. However, it also raises a critical question: where will the jobs come from?

The answer lies in micro, small, and medium-sized enterprises (MSMEs).

These businesses already make up more than 90% of companies across the continent. In addition, they account for roughly 70% of jobs. Clearly, they are the backbone of African economies.

However, despite their importance, most MSMEs still struggle to access financing.

The Financing Gap Holding Back Growth

Africa is not short of capital. In fact, up to $4 trillion in local savings and assets exists across the continent. However, much of this capital does not reach MSMEs.

As a result, a major financing gap persists. Estimates show a $331 billion gap in sub-Saharan Africa alone. Meanwhile, North Africa and the Middle East face an additional $187 billion gap.

Combined, this represents a half-trillion-dollar opportunity.

Yet traditional banking models continue to treat MSMEs as too risky or too complex. Consequently, many viable businesses remain underserved.

Technology Is Changing the Equation

However, the landscape is shifting.

Technology is making it easier to serve MSMEs at scale. Digital platforms, mobile banking, and alternative data now allow financial institutions to assess risk more accurately. At the same time, they reduce the cost of lending.

As a result, banks that have embraced these tools are already seeing stronger returns. More importantly, they are unlocking new markets.

In other words, MSME financing is no longer just a development issue. It is becoming a clear business opportunity.

Rethinking How Capital Works

At the World Bank Group, efforts are underway to address key barriers that have long limited MSME growth.

First, there is the issue of currency mismatch. Many African businesses earn in local currencies but borrow in foreign ones. This exposes them to exchange rate risks. New financing models now focus on local currency solutions, making lending more practical and sustainable.

Second, innovative instruments are proving that MSME finance can deliver multiple benefits. For example, sustainability-linked financing in countries like Egypt is supporting small businesses while advancing climate goals.

Third, risk perception is evolving. Through guarantee programs and blended finance, institutions are encouraging banks to lend to segments they previously avoided, including women-led businesses.

Building Systems, Not Just Transactions

Importantly, the focus is shifting from isolated deals to entire ecosystems.

When anchor firms grow, they create opportunities for smaller businesses. Suppliers, distributors, and service providers all benefit. This interconnected growth strengthens entire value chains.

As a result, job creation becomes more sustainable and scalable.

A Shift in Mindset Is Needed

Still, progress will depend on more than financial tools.

Regulators must support innovation while maintaining stability. Financial institutions must design products that match MSME realities. Investors must rely on better data rather than outdated assumptions.

Above all, there must be a shift in mindset.

MSMEs are not a side segment. They are central to Africa’s economic future.