$100m for African entrepreneurs

By PDS | 8 July 2005

Amidst the billions promised today by G8 governments for African governments, a smaller but significant private sector / charitable NGO initiative organised by the Shell Foundation and announced last week should not be overlooked.

A $100m fund will be established to help overcome a huge barrier to eradicating poverty in Africa, where local banks have capital, but millions of would-be entrepreneurs lack the collateral and formal records to meet the banks' stringent lending requirements. Since only small enterprises are capable of generating the millions of jobs required to sustainably put Africa on the path to growth, its arguably more important that this type of grassroots funding happens than that the billions in top-down funding occurs.

Chris West, deputy director of the Shell Foundation, explained that the initiative would plug Africa's yawning finance gap between micro credit and multi-million dollar finance. He said:

"While there is currently finance available for families to set up tiny businesses to buy assets like sewing machines, this model will never reach the scale required to have a major impact on reducing poverty. The beauty of this new fund is that it makes it easier for start-up and new enterprises to gain access to the larger amounts of finance - between $50,000 to $1m - needed to make a real difference."

In the long-term this $100m will hopefully generate billions in returns. Wealth creation which will sustainably underwrite the raising of living standards in a way that a foreign aid handout, of whatever magnitude, never will.