Small and medium enterprises (SMEs) in Africa are often called the “backbone” of the continent’s economy. And that’s not just a fancy phrase—they actually make up about 90% of businesses and employ nearly 80% of the labor force. But here’s the catch: most of them remain stunted in growth, unable to scale or compete globally, because the money simply doesn’t reach them. Banks keep their lending doors half-shut, venture capital is laser-focused on big shiny startups in fintech, and government schemes, though promising, often get tangled in bureaucracy. So, the question is—what’s really holding back these enterprises? The answer almost always circles back to one word: funding. And that’s where AfTra (African Trade Fund) has been quietly but steadily making waves.
The Role of SMEs in Africa’s Economy
When you think of Africa’s economy, you probably picture vast resources, booming cities like Lagos and Nairobi, or even the growing tech hubs in Kigali and Cape Town. But the real action? It’s happening in small shops, family-owned businesses, small-scale farmers, and budding service providers. SMEs account for a significant chunk of GDP, yet they struggle with high interest rates, limited access to credit history systems, and collateral requirements that would scare off even seasoned entrepreneurs.
In countries like Nigeria and Kenya, small businesses are innovating solutions for everything from food delivery to solar energy. But here’s the irony: while they create jobs, reduce poverty, and foster community resilience, they can’t break through to their next stage of growth because traditional financing models weren’t built with them in mind.
Why Funding Remains the Missing Link
Think about it—if you’re a small business owner in Ghana or Uganda, getting a loan isn’t just a matter of paperwork. It often requires land titles, audited statements, and a track record most new businesses can’t possibly have. Commercial banks, worried about risk, charge interest rates that can soar above 20%. Compare that with single-digit rates in developed economies, and you see why SMEs are stuck in a survival loop rather than thriving.
Another layer to the problem is investor perception. Many international investors view African SMEs as “high risk, low return.” That blanket stereotype keeps much-needed capital from flowing into sectors like agribusiness, local manufacturing, or community services that, if funded properly, could uplift entire regions.
How AfTra Steps In
Now, here’s where AfTra (African Trade Fund) comes into play. Created under the African Development Bank (AfDB), AfTra focuses on building trade-related capacity and reducing barriers that keep African businesses from growing. Instead of throwing generic loans into the market, AfTra designs projects that actually improve the enabling environment for SMEs.
For example, AfTra has funded programs to improve trade logistics, simplify customs procedures, and build stronger financial systems that can eventually support SME lending. A simple case in point: in landlocked African countries, transport and border costs can eat up to 75% of export expenses. AfTra-funded initiatives help streamline these processes, reducing costs and making it feasible for SMEs to think beyond local markets.
Here’s a quick look at how the gap looks today:
| Challenge | Impact on SMEs | AfTra’s Intervention |
|---|---|---|
| Limited access to credit | Stunted growth, inability to expand | Capacity building for financial institutions, trade finance facilitation |
| High cost of exports | Reduced competitiveness in global markets | Streamlining border/trade logistics |
| Weak infrastructure | Supply chain inefficiencies | Funding trade-related infrastructure projects |
| Regulatory barriers | Long delays, corruption, informal hurdles | Policy support and governance reforms |
Real-World Ripple Effects
The difference isn’t just in boardroom numbers. Take East Africa, where AfTra support has helped harmonize customs procedures across countries like Kenya, Uganda, and Rwanda. That means an SME exporting coffee or textiles no longer faces week-long delays at borders. Faster trade equals more revenue, more jobs, and more confidence to reinvest.
It also sends a signal to investors: Africa is serious about building systems that work. And that kind of systemic change can slowly undo the “high risk” narrative that keeps private capital away.
The Bigger Picture: AfCFTA and the SME Boom
There’s also the elephant in the room—the African Continental Free Trade Area (AfCFTA), the world’s largest free trade agreement by membership. The AfCFTA promises to connect 1.3 billion people across 55 countries into a single market. Sounds massive, right? But without SMEs being able to access finance, the benefits could be cornered by larger corporations. AfTra’s work ties directly into this vision, ensuring small businesses have the tools and funding access to take advantage of continental free trade.
And if done right, SMEs won’t just be passengers—they’ll be the drivers of Africa’s economic transformation.
FAQs
Why do African SMEs struggle to access finance?
Most SMEs lack collateral, audited records, and credit histories, making traditional banks reluctant to lend.
What sectors benefit most from AfTra support?
Agribusiness, trade logistics, manufacturing, and export-driven SMEs have seen the biggest gains.
Is AfTra a loan provider?
Not directly. AfTra funds projects that improve trade systems, indirectly enabling SMEs to access financing and markets.
How does AfTra link with AfCFTA?
By reducing trade barriers and improving infrastructure, AfTra ensures SMEs can leverage opportunities under AfCFTA.
Can private investors work with AfTra?
Yes, AfTra projects often complement private capital by reducing risks and improving the business environment.
