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SME Support and Development
The DFRC aims to assist the DFI Network through supporting the development and financing of the small and medium enterprises (SME) sector capable of exploiting the vast business opportunities that the region’s scarcely tapped natural and other resources offer. In so doing, regional employment opportunities will expand and begin to address the challenges posed by underdevelopment and poverty. Through targeted business support strategies for SMEs, the DFRC aims to assure the DFI’s sustainability through a stronger client base.
The development of SMEs lies at the core of economic growth worldwide. Research has revealed that across the world the SME sector employs one-half to two thirds of the labour force in developing countries and that the sector contributes significantly towards national incomes.
SADC governments have adopted different policies, strategies and programmes to promote SMEs in their countries. On the whole, the policies and programmes have not been as effective as desired. The SADC-DFRC aims to play a pivotal and catalytic role in this area through specially designed SME institutional support programmes to enhance DFIs’ delivery capacity and SMEs support at enterprise level.
The following constraints have been identified as facing SMEs in the SADC region:
On the financing side:
- Lack of medium to long-term finance for start-ups and expansions;
- inappropriate terms and conditions for short-term credit or trade finance;
- insufficient financing and other instruments to support the SME sector;
- low capitalization and lack of collateral; and
- poor record keeping or financial management
On the Business Support Side:
- low-level investment in infrastructure that has the potential to stimulate SME activity;
- complex and cumbersome laws and regulations that control and govern the setting up and development of SMEs;
- regulations that favour only big business and discourage SME start up and operation;
- inability to market SME products and services;
- absence of appropriate environmental management systems (ems) that meet international standards; and
- a dearth of programmes and, where they exist, uncoordinated programmes that support entrepreneurship with marginal support to women entrepreneurs.
As a consequence of these constraints the region has witnessed a proliferation of informal sector activity which needs to be transformed into formal businesses and integrated into the formal (taxable) economy. The DFRC has developed programmes and projects that will address these critical issues through the DFI Network and in collaboration with other development partners.