When Jasent Enterprise asked their bankers for GH¢50,000 to restock their trade, the answer was no: no audited books, no land title, too risky. Last month, they tried again. This time, the CEO’s Ghana Card and two years of mobile money (MoMo) transactions secured her approval within 48 hours.

Jasent’s story highlights Africa’s central contradiction: small and medium enterprises (SMEs) create over 80% of jobs, yet they remain largely excluded from formal credit. That is changing—fast—as banks rethink how they lend.

Why banks still say no
For decades, the problem was simple: no traceable identity, no loan. Banks lend depositors’ funds, so they are cautious about default risk. Most SMEs operate informally and cannot offer collateral.

Digital ID systems are addressing the first hurdle. Ghana’s upgraded Ghana Card now links citizens to verifiable identities and can be used for financial transactions. Nigeria’s NIN and BVN, Kenya’s Maisha Namba, and Rwanda’s national digital ID systems serve similar functions.

“Once we can authenticate and trace a borrower online, we can lend faster, safer, and at greater scale,” says an Accra-based credit head.

From collateral to cash flow
The second shift is in how banks assess risk. Collateral-heavy models are giving way to cash flow-based lending. Banks now analyse MoMo histories, point-of-sale (POS) data, and supplier payments to assess SME creditworthiness.

Non-interest banking is also expanding access. By using risk-sharing and partnership models instead of interest-bearing loans, it reduces collateral requirements for businesses with irregular cash flows. Nigeria and Kenya already operate Islamic finance windows that serve traders excluded from conventional credit.

Mobile money isn’t enough
Digital channels have reduced costs and sped up approvals, but current products remain limited. MTN’s Qwikloan in Ghana offers quick, collateral-free loans but is capped at GHS 2,500. Kenya’s M-Pesa products, such as Fuliza Biashara and Taasi Till, offer higher limits—up to KES 400,000—but challenges persist.

Network downtime, limited business data, and rural connectivity gaps continue to restrict access to larger financing. Digital lending has expanded, but most SMEs still cannot secure adequate working capital.

The GHS 400,000 question
Beyond micro-loans, SMEs need trade finance to scale. Instruments such as letters of credit, invoice discounting, and supply chain finance help free up cash and reduce risk for importers, manufacturers, and agribusinesses.

However, many SMEs rely on risky advance payments instead of documentary credits, exposing them to financial and regulatory risks. Banks must play a stronger advisory role in guiding businesses towards safer financing options.

De-risking with government support
Governments increasingly view SME financing as a national priority. Banks are leveraging credit guarantee schemes, interest rate subsidies, development finance institution (DFI) partnerships, and partial risk-sharing facilities to reach underserved groups, including youth- and women-led enterprises.

These public-private partnerships reduce the cost of lending and expand access to segments previously considered too risky.

Finance alone won’t work
Access to credit without capacity-building often fails. Leading banks now combine financing with training in bookkeeping, cash flow management, market access, and digital skills.

Improved financial management strengthens SME survival rates, benefiting both lenders and the broader economy.

The road ahead
Africa’s SME finance future depends on five key factors: innovative credit assessment, digital delivery, public-private partnerships, data-driven risk management, and regional market integration under the African Continental Free Trade Area (AfCFTA).

Financial institutions remain central, but fintechs, credit bureaus, telecom companies, governments, and DFIs all play critical roles. Institutions such as the World Bank and the International Finance Corporation (IFC) are already supporting efforts to strengthen financial sector capacity.

By shifting from collateral to cash flow, and from paperwork to data, banks can unlock the potential of millions of entrepreneurs. If they fail, Africa’s primary engine of job creation will stall. If they succeed, they will power the continent’s next decade of growth.

Short profile – Oliver Tackie
The writer, Oliver Tackie, is a seasoned banker with over nineteen years of experience in Ghana’s financial sector. He is currently the Sector Head for Government and Parastatals at Prudential Bank Ltd.

His work spans financial institutions, investment analysis, private sector development, and public sector financing, with expertise in assessing risk across diverse debt and equity structures. He is an award-winning chartered banker and chartered accountant, bringing strong technical expertise and strategic financial insight to his work.