Feature/OPED
Digitisation: Tackling Access to Finance for SMEs
By Michelle Knowles, Oladapo Adeigbe
Access to finance remains one of the single biggest constraints for small and medium-sized businesses on the African continent.
Nevertheless, it is important to understand the exact nature of the financing challenges experienced in order to design the tools to build financing capacity in this key sector of the economy.
When discussing SME financing, we tend to focus on early-stage and start-up financing. While this is certainly an important topic in the small business ecosystem, this may not necessarily be where financing efforts should be focused.
Rather a concerted effort to improve the value proposition around trade finance may offer a higher impact solution, particularly in Africa where the trade financing gap has risen to $82 billion and is still widening. Trade Finance is the oil that greases supply chains and ensures that buyers and sellers can ultimately fulfil their obligations.
For instance, a construction company places an order for work overalls from a local supplier. The construction company might only pay for the fulfilment of the contract.
However, the supplier has to deal with manufacturing capacity, people and raw materials to fulfil the order. This roadblock is a common issue for small businesses who receive orders but are unable to readily access the finance to fulfil these orders – it impacts not only the organisation which has received the contract but also the downstream suppliers.
Without finance to facilitate the transaction, the entire supply chain comes to a halt.
Trade finance becomes highly relevant here, by introducing liquidity into this transaction.
One of the segments that has been impacted the most by the exit of large global banks in frontier and emerging market economies (following the economic fall-out of the ongoing COVID-19 pandemic and the subsequent impact on the availability of trade finance) is SMEs.
The reasons for this are varied but the cost of regulation in the sector has increased, the perceived credit-worthiness of SMEs and lack of credit data are issues and foreign currency availability challenges persist when it comes to trade.
Financial inclusion across Africa is yet to peak as most SMEs operate in the informal sector and are largely unbanked. Hence, their viability cannot be ascertained or assessed directly by financial institutions.
More, the hurdles that impede growth in the informal market have not been effectively tackled. For example, an average transaction that involves, for instance, customs clearance in the local ports requires tons of paper documents which slow down trade activities by forcing unnecessary supply chain bottlenecks.
These trade and finance situations form a hurdle for a larger percentage of the SMEs who require ease of doing business and the valuable financial products offered by the banks to drive their growth plans.
It is for this reason Absa is focused on powering trade finance across Africa and enhancing the role that digitisation will play in facilitating access to finance for small businesses.
Digitisation is a key enabler in democratising trade finance and the pandemic has accelerated the adoption of digital trade finance solutions by SMEs and corporates. While technology-driven solutions are becoming more and more relevant, much of the trade finance sector is still very paper-driven with manual processes slowing down access to finance.
To digitize trade finance, the entire ecosystem needs to support and participate in re-imagining how we unlock value. This includes integrating activities between all role players including the regulators, the logistic companies, banks and other non-bank financial institutions (e.g., fintechs).
This will drive a concept that is known as Digital Trade Ecosystems which are secure online platforms that facilitate the exchange of data between partners in trade finance networks and will be a catalyst for the sector.
While innovation and technological advancements are important, there are three issues that have to receive urgent attention over the coming year to leverage the positive impact digitisation could have on SME’s
The first is a focus on the interoperability of systems to facilitate coherent industry-wide solutions that can operate at scale. This will become particularly relevant in Africa with the opening up of the African Continental Free Trade Area which is expected to be a big driver of cross-border trade.
The second issue will be Standardisation. A major issue for the sector as a whole is that only parts of the Trade and Trade Finance process are subject to digital innovation, whereas the end-to-end digitalisation across the trade value chain remains fragmented. We need a common language, technology and credit-scoring systems to facilitate faster access to solutions.
Thirdly, there needs to be a focus on more agility in the regulatory space. A perfect example of this is the limited acceptance of electronic documents and digital signatures on contracts by banks and other stakeholders. Millions of dollars of transactions could be freed up through the adoption of these digital tools, but there needs to be regulatory buy-in as a priority.
Digitisation must be supported by increasing foreign currency availability, and regulatory reform as it relates to the treatment of trade finance. Hence collaboration is required between the financial industry, Fintech, DFI’s and regulators. At Absa, we have seen and continue to see, increasing demand for these digital solutions and are accelerating our efforts to be a key driver of trade finance solutions on the continent and to be an enabler of the AfCFTA Agreement which is a critical step to building a healthy SME ecosystem for Africa.
Michelle Knowles is the Head of Trade Finance at Absa, while Oladapo Adeigbe is the Head of Financial Institutions Trade Sales at Absa
By Luke Kyohere
The global payments landscape is undergoing a rapid transformation. New technologies coupled with the rising demand for seamless, secure, and efficient transactions has spurred on an exciting new era of innovation and growth. With 2025 fast approaching, here are important trends that will shape the future of payments:
1. The rise of real-time payments
Until recently, real-time payments have been used in Africa for cross-border mobile money payments, but less so for traditional payments. We are seeing companies like Mastercard investing in this area, as well as central banks in Africa putting focus on this.
2. Cashless payments will increase
In 2025, we will see the continued acceleration of cashless payments across Africa. B2B payments in particular will also increase. Digital payments began between individuals but are now becoming commonplace for larger corporate transactions.
3. Digital currency will hit mainstream
In the cryptocurrency space, we will see an increase in the use of stablecoins like United States Digital Currency (USDC) and Tether (USDT) which are linked to US dollars. These will come to replace traditional cryptocurrencies as their price point is more stable. This year, many countries will begin preparing for Central Bank Digital Currencies (CBDCs), government-backed digital currencies which use blockchain.
The increased uptake of digital currencies reflects the maturity of distributed ledger technology and improved API availability.
4. Increased government oversight
As adoption of digital currencies will increase, governments will also put more focus into monitoring these flows. In particular, this will centre on companies and banks rather than individuals. The goal of this will be to control and occasionally curb runaway foreign exchange (FX) rates.
5. Business leaders buy into AI technology
In 2025, we will see many business leaders buying into AI through respected providers relying on well-researched platforms and huge data sets. Most companies don’t have the budget to invest in their own research and development in AI, so many are now opting to ‘buy’ into the technology rather than ‘build’ it themselves. Moreover, many businesses are concerned about the risks associated with data ownership and accuracy so buying software is another way to avoid this risk.
6. Continued AI Adoption in Payments
In payments, the proliferation of AI will continue to improve user experience and increase security. To detect fraud, AI is used to track patterns and payment flows in real-time. If unusual activity is detected, the technology can be used to flag or even block payments which may be fraudulent.
When it comes to user experience, we will also see AI being used to improve the interface design of payment platforms. The technology will also increasingly be used for translation for international payment platforms.
7. Rise of Super Apps
To get more from their platforms, mobile network operators are building comprehensive service platforms, integrating multiple payment experiences into a single app. This reflects the shift of many users moving from text-based services to mobile apps. Rather than offering a single service, super apps are packing many other services into a single app. For example, apps which may have previously been used primarily for lending, now have options for saving and paying bills.
8. Business strategy shift
Recent major technological changes will force business leaders to focus on much shorter prediction and reaction cycles. Because the rate of change has been unprecedented in the past year, this will force decision-makers to adapt quickly, be decisive and nimble.
As the payments space evolves, businesses, banks, and governments must continually embrace innovation, collaboration, and prioritise customer needs. These efforts build a more inclusive, secure, and efficient payment system that supports local to global economic growth – enabling true financial inclusion across borders.
Luke Kyohere is the Group Chief Product and Innovation Officer at Onafriq
In a heartfelt statement released today, the Conference of Nigeria Political Parties (CNPP) has extended its warmest congratulations to Ghana’s President-Elect, emphasizing the importance of learning from Ghana’s recent electoral success as Nigeria gears up for its 2027 general elections.
In a statement signed by its Deputy National Publicity Secretary, Comrade James Ezema, the CNPP highlighted the need for Nigeria to reclaim its status as a leader in democratic governance in Africa.
“The recent victory of Ghana’s President-Elect is a testament to the maturity and resilience of Ghana’s democracy,” the CNPP stated. “As we celebrate this achievement, we must reflect on the lessons that Nigeria can learn from our West African neighbour.”
The CNPP’s message underscored the significance of free, fair, and credible elections, a standard that Ghana has set and one that Nigeria has previously achieved under former President Goodluck Jonathan in 2015. “It is high time for Nigeria to reclaim its position as a beacon of democracy in Africa,” the CNPP asserted, calling for a renewed commitment to the electoral process.
Central to CNPP’s message is the insistence that “the will of the people must be supreme in Nigeria’s electoral processes.” The umbrella body of all registered political parties and political associations in Nigeria CNPP emphasized the necessity of an electoral system that genuinely reflects the wishes of the Nigerian populace. “We must strive to create an environment where elections are free from manipulation, violence, and intimidation,” the CNPP urged, calling on the Independent National Electoral Commission (INEC) to take decisive action to ensure the integrity of the electoral process.
The CNPP also expressed concern over premature declarations regarding the 2027 elections, stating, “It is disheartening to note that some individuals are already announcing that there is no vacancy in Aso Rock in 2027. This kind of statement not only undermines the democratic principles that our nation holds dear but also distracts from the pressing need for the current administration to earn the trust of the electorate.”
The CNPP viewed the upcoming elections as a pivotal moment for Nigeria. “The 2027 general elections present a unique opportunity for Nigeria to reclaim its position as a leader in democratic governance in Africa,” it remarked. The body called on all stakeholders — including the executive, legislature, judiciary, the Independent National Electoral Commission (INEC), and civil society organisations — to collaborate in ensuring that elections are transparent, credible, and reflective of the will of the Nigerian people.
As the most populous African country prepares for the 2027 elections, the CNPP urged all Nigerians to remain vigilant and committed to democratic principles. “We must work together to ensure that our elections are free from violence, intimidation, and manipulation,” the statement stated, reaffirming the CNPP’s commitment to promoting a peaceful and credible electoral process.
In conclusion, the CNPP congratulated the President-Elect of Ghana and the Ghanaian people on their remarkable achievements.
“We look forward to learning from their experience and working together to strengthen democracy in our region,” the CNPP concluded.
By Kenechukwu Aguolu
The proposed tax reform, involving four tax bills introduced by the Federal Government, has received significant criticism. Notably, it was rejected by the Governors’ Forum but was still forwarded to the National Assembly. Unlike the various bold economic decisions made by this government, concessions will likely need to be made on these tax reforms, which involve legislative amendments and therefore cannot be imposed by the executive. This article highlights the purposes of taxation, the qualities of a good tax system, and some of the implications of the proposed tax reforms.
One of the major purposes of taxation is to generate revenue for the government to finance its activities. A good tax system should raise sufficient revenue for the government to fund its operations, and support economic and infrastructural development. For any country to achieve meaningful progress, its tax-to-GDP ratio should be at least 15%. Currently, Nigeria’s tax-to-GDP ratio is less than 11%. The proposed tax reforms aim to increase this ratio to 18% within the next three years.
A good tax system should also promote income redistribution and equality by implementing progressive tax policies. In line with this, the proposed tax reforms favour low-income earners. For example, individuals earning less than one million naira annually are exempted from personal income tax. Additionally, essential goods and services such as food, accommodation, and transportation, which constitute a significant portion of household consumption for low- and middle-income groups, are to be exempted from VAT.
In addition to equality, a good tax system should ensure equity and fairness, a key area of contention surrounding the proposed reforms. If implemented, the amendments to the Value Added Tax could lead to a significant reduction in the federal allocation for some states; impairing their ability to finance government operations and development projects. The VAT amendments should be holistically revisited to promote fairness and national unity.
The establishment of a single agency to collect government taxes, the Nigeria Revenue Service, could reduce loopholes that have previously resulted in revenue losses, provided proper controls are put in place. It is logically easier to monitor revenue collection by one agency than by multiple agencies. However, this is not a magical solution. With automation, revenue collection can be seamless whether it is managed by one agency or several, as long as monitoring and accountability measures are implemented effectively.
The proposed tax reforms by the Federal Government are well-intentioned. However, all concerns raised by Nigerians should be looked into, and concessions should be made where necessary. Policies are more effective when they are adapted to suit the unique characteristics of a nation, rather than adopted wholesale. A good tax system should aim to raise sufficient revenue, ensure equitable income distribution, and promote equality, equity, and fairness.
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