The landscape of SME financing faces significant volatility characterised by sharp increases in financing costs and a marked decline in traditional lending volumes. This can promote innovation in financial instruments and risk mitigation approaches and create growth obstacles for SMEs at the same time.
In response to these market pressures, the financial sector has witnessed the emergence and strengthening of alternative financing mechanisms. Asset-based finance has gained prominence, while equity solutions and fintech innovations have created new pathways for SME funding. Traditional support mechanisms including insurance, embedded finance, and leasing have evolved to meet contemporary needs. This diversification of financial instruments, while offering more options for SMEs, has introduced new complexities in risk assessment and elevated the importance of financial literacy among small business owners.
Factors such as available instruments, implementation conditions, and the impact of Artificial Intelligence (AI) and Machine Learning (ML) were discussed at a roundtable titled “The evolving nature of financial and risk mitigation instruments for SMEs”. Moderated by Homam Hashem, Chief Executive Officer and Kafalah SME Loan Guarantee Program, the discussants explored the emergence of new financial instruments, the impact of digitalisation, and the growing importance of ESG considerations in SME financing. This session included Jerry Osagie, SME Finance, African Export-Import Bank, Karen Kastner, Secretary General, The Montreal Group, Luis Felipe Monteiro, Member of the Board of Directors, GLIEF, Mert Dedebas, Head of MENA Regional Office, Frankfurt School of Finance and Management, Rennie Kariuki, Senior Underwriter in-charge of Kenya, Ethiopia, Japanese Desk and SME Champion, ATIDI, Wendy Delmar, Chief Executive Officer, Caribbean Association of Banks Inc and Mariane Takahashi, CEO, ABStartups.
This report summarises insights from the roundtable to examine how financial institutions, development banks, and regulatory bodies are adapting their approaches to better serve SMEs while managing risks effectively.