Micro, Small, and Medium Enterprises (MSMEs) in Africa have long struggled to access long-term, growth-focused financing, particularly in sectors like agriculture and trade. While banks and financial institutions are exploring alternative data and bundled financial products to cater to the needs of MSMEs, challenges around dependency and regulatory costs remain barriers to financial inclusion. Elizabeth Gathu, Manager at MSC, recently joined CNBC Africa to discuss the innovations in value-chain financing and the policy changes needed to create a sustainable and inclusive finance ecosystem for MSMEs. One of the key themes discussed in the interview was the importance of rethinking MSME financing through data, technology, and policy innovation. Gathu highlighted the need for regulatory solutions that enable digital processes, such as data protection laws and Know Your Client (KYC) laws. She emphasized the role of FinTechs and Village Savings and Loan Associations (VSLAs) in bringing innovative solutions to underserved communities, urging policymakers to incentivize digital innovation and reduce regulatory fragmentation. Key Points: 1. Value Chain Financing and Regulation: Gathu emphasized the success of supply chain financing models in Africa, particularly in the agriculture sector. These models focus on mapping the entire value chain, from producers to processors, and providing financial solutions that address the specific needs of each segment. She noted that regulatory hurdles, such as restrictions on VSLAs registration, can hinder access to formal finance for MSMEs. By enabling VSLAs and informal groups to access bank loans and bundled financial products, regulators can facilitate greater financial inclusion. 2. Innovative Financial Products and Solutions: The interview also delved into the importance of innovative financial products in supporting MSME growth. Gathu highlighted the impact of bundled financial solutions that encompass advance payments, credit facilities, insurance, and even non-financial support like school fee loans. These products not only reduce the risk of fund diversion but also cater to the diverse financial needs of MSMEs. By linking financial products to specific business needs, such as input financing or direct school fee payments, financial institutions can empower MSMEs to expand their businesses and improve livelihoods. 3. Policy Changes for Scalable Financing: Gathu underscored the urgent need for policy changes to unlock scalable financing for MSMEs in Africa. She suggested that regulatory improvements, particularly in data protection and KYC laws, could incentivize FinTechs and non-bank lenders to reach underserved populations. By streamlining registration processes and reducing bureaucratic requirements for cross-border traders, policymakers can create an enabling environment for small businesses to access regional markets and expand their operations. Quote: Elizabeth Gathu highlighted the significance of regulatory improvements and reduced bureaucratic hurdles for MSMEs: 'If we have regulatory improvements that incentivize digital protection and enable innovative solutions for FinTechs, we can unlock greater access to finance for underserved communities.' As Africa strives towards greater financial inclusion and trade integration, initiatives focused on leveraging data, technology, and policy innovation will play a crucial role in driving sustainable MSME financing. By addressing regulatory challenges and fostering a supportive ecosystem for innovation, the continent can unlock the potential of its vibrant MSME sector and drive economic growth and prosperity for all.