Bridging the MSME identification gap
Bridging the MSME identification gapAugust 12, 2021 •
Cenfri and Cornerstone partnered with the Global Legal Entity Identifier Foundation (GLIEF) to boost economic potential for African businesses by bridging the micro, small and medium enterprises (MSME) identification gap.
MSMEs all over the world lack legal documentation to prove who they are. Lack of ID results in millions of MSMEs being financially excluded as they struggle to gain access to international trade finance and credit opportunities, as evidenced by the IFC’s MSME finance gap assessment, which estimated the global gap to be $5.2 trillion in 2017.
The Legal Entity Identifier (LEI) is a globally recognised and standardised form of business ID created to provide SMEs with the necessary documentation for financial institutions, regulators, and business partners to identify an MSME and access key legal reference data, substantially reducing the risk and cost of doing business with these MSMEs.
A partnership to boost financial inclusion for MSMEs in Africa. Cenfri, Cornerstone and GLEIF partnered to implement a project that utilises GLEIF’s validation agent model to equip at least 50 MSMEs in Africa with an LEI by the end of 2021. LEI works by enabling financial institutions to offer their clients an LEI during or after the onboarding process, utilising data already collected during the CDD process.
The introduction of Africa’s first LEI agent and issuing of Africa’s first LEI to an MSME. This five-month pilot project took place in Zimbabwe, where the most recent data shows that the MSME sector contributes more than 60% of the country’s GDP, yet only 3.8% of the banking sector’s loans and advances are extended to these businesses. The project worked with NMB Bank Limited, due to their existing strategy and commitments to support financial inclusion and improve MSME identification. Within this project, NMB Bank became the first validation agent and subsequently issued Africa’s first MSME LEI to Copperwares, a Zimbabwean copper and silver giftware manufacturer.
The pilot demonstrated the potential to create a more enabling business environment by increasing trust and transparency in supply chain partnerships, which will enable more trade finance for MSMEs and less red tape, thereby enhancing cross-border trade. To fully realise the value of the LEI, large African players, financial institutions and SMEs need to adopt the LEI to close the global MSME gap.
Find out more about this pilot by reading the report or reach out to Matthew Ferreira for more information on our MSME identification-related work.