Africa-Press – Eswatini. The World Bank says the MSME sector, which mainly comprises informal microenterprises, needs targeted support, including through credit guarantee schemes.
According to the World Bank’s August 2023 economic update of Eswatini, an existing credit guarantee scheme, which guarantees 50 per cent of loans, was underutilised. A World Bank assessment of the compliance of the Small-Scale Enterprise Loan Guarantee Scheme and the Export Credit Guarantee Scheme with the principles of good practice for Micro, Small and Medium Enterprises (MSME) credit guarantee schemes highlighted weakness in these schemes in terms of corporate governance structure, transparent and consistent risk-based pricing policies, and disclosure of nonfinancial information. The World Bank says improving the MSME guarantee scheme and providing technical support to build the capacity of firms could help high-performing MSMEs secure financing to grow their businesses.
The international organisation further opined that better trade logistics and integration, along with regulatory reform, would facilitate trade and drive export-led growth. With Eswatini being a small open economy, the export sector was a key driver of economic growth. As noted in the Country Private Sector Diagnostic, reforms to address trade logistics and facilitation would help increase exports and diversify the export base, and so reduce the country’s vulnerability to shocks. Eswatini has comparative advantages in sugarcane and textiles and can leverage its preferential access to regional and global markets to grow exports, create jobs, and stimulate broad-based economic growth. The World Bank also lamented that the business environment in Eswatini was seen to be constrained and perceptions of public sector corruption continue to worsen.
It was highlighted that improving the climate for private investment would require streamlining the regulatory framework, which often creates a barrier to the entry of MSMEs. Bureaucratic requirements make it difficult and even prohibitively expensive for SMEs to set up and run a business. Other priorities include strengthening the Anti-Corruption Commission (bringing the anticorruption legal framework in line with the UN Convention against Corruption) and operationalising the Commercial Court established in 2022, along with the Small Claims Court. To minimise corruption, public officials should also be encouraged to declare assets upon taking and leaving office. To improve access to finance for enterprises, enhancements to the business environment need to be complemented by better credit infrastructure.
Key actions include improving frameworks for the sharing of credit information and the use of movable assets as collateral, as well as strengthening the corporate insolvency system. To improve credit information sharing, subordinate regulations to the Credit Consumer Act 2021 need to be issued to support the licensing of credit bureaus, the use of credit bureau analytics, data standards, and dispute resolution, among other issues. As for the use of movable assets as collateral, a unified law for secured transactions is required, which covers all types of movable assets, provides clarity on the priority rules for secured creditors, and allows outof-court enforcement; this should be complemented by an online, notice-based collateral registry system. Lastly, a modern commercial insolvency framework that has special insolvency procedures for SMEs can improve recovery rates and reduce the costs for secured creditors during insolvency processes.
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