Sub-Saharan African micro and SME finance markets are expected to grow by 5-10% next year, according to the newly published responsAbility ‘Micro and SME Finance Market Outlook 2017’.

Meanwhile, in the Middle East and North Africa (MENA), the growth is expected to be around 10-15%, driven by high levels of demand in these markets.

Paul Hailey, Senior Research Analyst at responsAbility, believes that Africa in 2017 will be “very much a tale of two continents”. 

“Although microfinance is sometimes more resilient to economic headwinds than conventional finance, growth will still be muted in economies dependent on energy or metals exports, such as Nigeria or Zambia,” he said.

“However, many African economies do not face these headwinds, perhaps because they have export profiles that are more diversified and/or are net importers of these two commodity groups. As a result, the operating context for microfinance and SME finance institutions in these markets will be much more benign,” he told Africa Global Funds.

Hailey said that in addition, many of the markets in this “second continent” have in the past few years seen considerable development in terms of financial regulation and the development of the sector. 

Above all, it is worth underlining the sheer weight of demand – according to the World Bank’s Findex survey, in 2014 only 29% of adults in sub-Saharan Africa had a bank account at a formal financial institution. 

“This represents a five percentage point increase on 2011, but still falls far short of the 46% seen in South Asia, let alone the 94% seen in high income OECD countries. As a result, there is a significant growth potential for the financial sector in Africa, not to mention the opportunity for investors to have a substantial positive impact by investing in microfinance and SME finance institutions in the region,” he said.

When asked about opportunities, Hailey said that responsAbility feels “more optimistic” about Côte d’Ivoire, Tanzania, Rwanda and Kenya.

“In Côte d’Ivoire, with the impact of the war fading and the political situation stabilising, prospects for growth remain positive. The microfinance sector has made considerable progress in the last three years especially. In Tanzania, economic growth remains high, although the pace of reforms remains uneven,” he said. [Pictured: Access Finance in Tanzania, one of responsAbility’s investee microfinance institutions in action]

“Rwanda remains politically and economically stable, with a raft of reforms planned or agreed; and in Kenya, despite the uncertainties that apply to some parts of the financial sector following the recent changes to maximum interest rates, both the economic context and the spreads available on debt investment remain promising. In addition some of the other regulatory changes should be credit positive in the medium term,” added Hailey.

responsAbility’s ‘Micro and SME Finance Market Outlook’, which has been published each year since 2010, is one of the most-read publications about this investment theme. 

It explores global developments in the microfinance industry and produces forecasts for the next 12-14 months. 

The publication contains the views of experts from all major markets and combines their assessments with key macroeconomic indicators and the comprehensive data collected through responsAbility’s business activities.