Times Of Swaziland: CPF TO STRENGTHEN CREDIT SCHEMES FOR MSMES

CPF TO STRENGTHEN CREDIT SCHEMES FOR MSMES
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Nhlanganiso Mkhonta on 19/07/2023 14:53:00


MBABANE – The recently launched Country Partnership Framework (CPF) for the
Kingdom of Eswatini seeks to consolidate and strengthen credit schemes for Micro
small and medium enterprises (MSMEs).
The CPF was launched by the Prime Minister, Cleopas Sipho Dlamini, on Monday.
The CPF is an initiative driven by the World Bank Group (WBG) and it is aimed to
run for the financial year 2024 until 2027. The project seeks to provide select
assistance to lower barriers of the private sector growth and create
opportunities for MSMEs, with a focus on youth and women. The 86-page document
highlighted that addressing constraints in the business and investment climates
to accelerate private sector development and job creation represented an
important priority for Eswatini.
During the course of the project, planned Developing Policy Financing (DPF)
financing and WBG analytics will support streamlining of trade licensing and
improvements to contract enforcement, including establishment of a specialised
bench for trade disputes, and reforms to open the Information, Communication and
Technology (ICT) sector to greater competition.
A proposed investment lending project will support the growth and resilience of
exporting firms, MSMEs, and entrepreneurs, by increasing access to finance,
improving the business environment, strengthening MSMEs support services, and
enhancing firm competitiveness.
Assist
To reduce macro-fiscal volatilities arising from disasters, the project would
also assist the government in establishing a Disaster Management Fund, backed by
sovereign insurance, to help affected MSMES during shocks. In addition, MSMEs
are vulnerable to economic, financial and other shocks and faces challenges
without any financing mechanisms to support them to build resilience. Domestic
credit to the private sector in Eswatini was only 20.9 per cent of GDP in
2019-lower than the SSA average of 40.7 per cent and the LMIC average of 43.9
per cent. The legal foundations for a digital economy are underdeveloped and
access to digital services remains low and costly. The project will support
investment promotion and business environment reforms; consolidate and
strengthen credit schemes for MSMES; fund matching grants and investments for
high potential MSMES, with specific support for women-owned MSMEs; develop a
digital platform to create market linkages for improved access to business and
financial services; and fund an early stage financing facility for
entrepreneurs, particularly youth and female entrepreneurs.
This will include considerations of providing financial services, tailored to
women’s needs. The project will build and complement ongoing support under the
Southern Africa Jobs Platform, including through support for the Innovation
Bridge Digital entrepreneurship portal, which connects networks of entrepreneurs
and innovators regionally. This support will center on the Royal Science and
Technology Park (RSTP), which houses Eswatini’s only digital incubator,
digital skills academy, and national data centre.
Structure
The project is driven by the fact that Eswatini’s private sector has a dual
structure comprising a small number of large firms that dominate trade and
Foreign Direct 1nvestment (FDI), but more than 59 000 MSMEs, mostly in rural
areas, account for about 40 per cent of employment. Businesses contend with a
weak regulatory environment, difficulties in trade facilitation and licensing,
and weaknesses in investor protection, particularly contract enforcement. Of
total employment, formal employment accounts for 25.4 per cent but informal
employment 61.9 per cent. In 2017, Eswatini’s informal economy represented 39
per cent of Gross Domestic Product (GDP) - the highest among Southern Africa
Customs Union (SACU) countries.
It is worth noting that MSMES have limited access to finance attributable to a
small banking sector, weak credit infrastructure, high returns on government
securities, and challenges in using Swazi Nation Land (SNL) as collateral.