SME attitudes towards financing opportunities from developmental agencies
By Chidi Koldsweat
Access to finance is constantly identified as a key element needed for SMEs and social enterprises to build production capacity, compete globally, create jobs, access new technology, directly impact their economies and compete in global markets. Interestingly, based on our work at Donors for Africa, we find that there are several grants and funding available for every single activity – from securing a university education, to travel, to funding a wish, idea or startup and even to scaling up an existing venture – local and international funding is available for all.
SMEs and social enterprises must explore alternative funding for their organizations, not for the sole purpose of winning, but also to understand what is required of them. Applying for these opportunities forces you to level up and bring your organization’s standards to be at par with global enterprises, positioning you to access other global opportunities and development ecosystems. All it takes is for you to move from your comfort zone as it will challenge everything you do in your business and how you do it. Some organizations to consider for alternative funding are The Tony Elumelu Foundation, Grofin Fund, Global Fund for Women, Lagos State Entrepreneurs Trust Fund and so many more.
However, while we understand the vital role access to financing plays, we cannot disregard that this may not be the most important ingredient needed to increase impact and become sustainable. There really is so much that development agencies, whose goal is to help support economic growth within a specified city; region or state, can do to continue to expand financial opportunities. Although by providing necessary resources and assistance, they have become the best sources of information for SMEs and social enterprises looking to expand their ideas and businesses, organizations cannot depend solely on them for their needs.
To experience long term sustainable growth in any sector, entrepreneurs and leaders must focus on creating value-driven businesses and social enterprises worthy of investment rather than depend solely on grants for survival. With the increase in grants and zero-interest based financing, we must ask the key question: Are SMEs and social enterprises ready to access financing to increase their impact?
Below are key areas organizations looking to scale up and increase their impact must begin to address:
- Structure: Structural development occurs in proportion to the work the organization is doing. Irrespective of your current size, you should think about structure from the very beginning of your organization’s existence. From governance, to policies by which the organization operates and the distribution of roles – this is key in ensuring transparency and preparedness in accessing a certain level of funding.
- Capacity: Based on recent research conducted by our organization, we realized that while there is a clamour for increased funding by business owners, what is truly lacking are well-developed ideas in the hands of competent leaders. Improved human capital within any organization is directly related to improved growth. At a basic level, SMEs or social enterprises must invest in their capacity, learning and setting standards on basic principles in accounting, strategy, marketing and other key competencies required to effectively run a thriving business.
- Technological Innovation: For SMEs and social enterprises, technology can spur growth, increase client value and market differentiation. It stimulates efficiency, and if properly utilized, can ensure sustainability. It increases organizational efficiencies especially in today’s highly competitive marketplace. The use of software or sharing tools to keep different members of a team up-to-date with the state of a project, even when they are not actively working on a specific portion of it can increase productivity.
Although efficiency is important for any type of business, it is especially essential for not-for-profit organizations, which have more limited resources. Not only does it increase brand presence, it provides a unique opportunity to tell your brand story to a larger audience. Technology creates room for automated solutions and innovations in every area. It cannot be overrated as its increasing importance is better experienced than discussed.
Other areas SMEs and social enterprises need to improve on include: organizational leadership, customer centric values, beneficiary needs, human resources amongst others.
In conclusion, while we believe SMEs and social enterprises must refrain from viewing development agencies as ‘saviours’ and focus more on building their internal processes, the government and key decision makers must also create enabling business environments for these organizations to thrive. From increasingly active engagement by the private sector for financing for non-profits to ensure that with more flexible parameters, SMEs can access procurement opportunities. They should consider replicating international best practice relevant locally. Other key areas to consider are alternative financing, regulatory policies, reduced multiple taxation, etc.
A thriving business environment for SMEs and social enterprises will lead to rapid growth and socio-economic impact for the government and most importantly its citizens. A diversified and prosperous economy is only possible when organizations are given room to flourish and do so sustainably.
Editor’s Note: This article was originally published in The Spark Magazine. Find the magazine here to read other articles.