African, European, multilateral and bilateral partners have launched the Alliance for Entrepreneurship in Africa (AforE) to support a stronger private sector, entrepreneurship and the growth of small and medium-sized businesses across Africa.

AforE will combine and focus the technical and financial strengths of its members to improve Africa’s business environment and support the growth and success of small and medium-sized enterprises (SMEs), women in business and young entrepreneurs.

Through a private-sector-focused cooperation platform, the alliance will support the roll-out of new initiatives to expand financing options for Africa’s SMEs, which cite a lack of access to finance as a major constraint to growth.

According to global financial organisation the World Bank, SMEs account for up to 90% of all businesses in sub-Saharan Africa and represent 38% of the region’s gross domestic product. Prior to Covid-19, development finance institution the International Finance Corporation (IFC) estimated the funding gap faced by SMEs in the region at $331-billion.

The launch of the alliance comes as African economies recover and rebuild from the effects of the Covid-19 pandemic, with small businesses seen as important drivers of job creation, innovation and the delivery of essential goods and services.

“The creation of the alliance reflects the strong commitment of African, European, multilateral and bilateral institutions, in coordination with the African Union, European Commission and others, to bolster Africa’s private sector amid ongoing African and global economic challenges,” the AforE members say in a joint statement.

The IFC will serve as the alliance secretariat helping to coordinate the activities and operationalise the initiative in partnership with the French Treasury.

In addition to financing projects, the alliance will support reforms aimed at strengthening the business and investment climate across Africa and facilitate the growth of private sector initiatives in more sustainable green and digital sectors.

“Banking and non-banking financial institutions, other public and private sector organisations, such as foundations, philanthropic organisations and venture capital firms, and business and innovation training providers, including incubators, accelerators, universities, may also join the Alliance,” the AforE partners note.

The core members of the alliance include development finance institutions the African Development Bank (AfDB); the European Bank for Reconstruction and Development; the European Investment Bank (EIB); the European Development Finance Institutions; the French Treasury; the IFC and Proparco, the private sector financing arm of Agence Française de Développement Group, or AFD Group.

In addition to its core members, the alliance aims to bring together multilateral and bilateral development banks, bilateral donors and African national development banks.

“Small businesses and entrepreneurs in Africa are drivers of inclusive growth, economic stability and resilience. Supporting their growth will be critical to creating jobs and helping Africa recover from the Covid-19 crisis. And the Alliance for Entrepreneurship in Africa stands ready to do that. IFC is proud to be part of this initiative, which deepens the partnership between international partners to give small businesses the support they need and deserve,” says IFC MD Makhtar Diop.

“Micro, small, and medium-sized enterprises are vital to Africa’s prosperity. They represent 90% of all businesses and generate more than half of all jobs. Supporting existing businesses and the ecosystem for entrepreneurs to create innovative new ones lies at the heart of our private sector development strategy,” AfDB private sector, infrastructure and industrialisation VP Solomon Quaynor points out.

“The AfDB is committed to the Alliance for Entrepreneurship in Africa. We want to ensure that African entrepreneurs have the means to thrive and can play an important part in solving Africa’s development challenges.”

“Ensuring that African entrepreneurs and companies can access finance is crucial to accelerate growth and create jobs. Over the last two years EIB has been very active to support financial institutions that help SMEs particularly hit by the Covid-19 pandemic.

"We are pleased to be a core member of the Alliance for Entrepreneurship in Africa. This initiative combines the financial and technical strengths and local insight of African and international partners and, together, we can ensure a better future for African business,” said EIB VP Ambroise Fayolle.