##saka at which views of various stakeholders on what needs to be done to address binding constraints to the sme sector were considered. the fact that the discourse on sme financing continues underpins two significant positions. firstly, it gives recognition to the fact that we are all aware of the potential of this sector in generating employment, promoting economic growth and reducing existing poverty levels. in low income sub - saharan african countries, smes and micro - enterprises make up about 90 % of all enterprises. however, due to the various constraints they face, their overall contribution to gdp can in some countries be as low as 20 % although estimates show that this could be scaled up to 60 % with the greater realization of the sector ’ s potential. contribution to employment can be as high as 63 %. for most low income countries, smes are the main bis central bankers ’ speeches source of jobs and income after subsistence agriculture. particularly significant is that they are a great source of livelihood for women who own more than half of smes while over 70 % of africa ’ s rural population survives through the formal and informal sme sector. there is little doubt, therefore, that smes form a solid basis for sustainable economic development on our continent. secondly, the continued discourse on smes reminds us of the possibility that we have probably done more talking about the problem than fixing it. although the development of smes is varied extensively across africa, what is clear is that in most countries a major obstacle to their growth is the lack of sustainable and cost effective financial products. south africa and mauritius in this region and north africa have done a commendable job in developing flourishing smes sectors. part of the reasons for success in these countries can be attributed to their modern financial systems and clear policies that support the growth of the sector. however, the fact still remains that for most african countries, a sustainable way of financing smes has yet to be found. as i mentioned earlier, the programme for this meeting is broad and extensive. but i would wish to draw your attention to a number of broad areas of reflection which i believe can help in delivering greater finance to the sector. the first area is that there is a need to accept that not all banks can or should even be expected to provide sme financing products. the cost structure and skills orientation simply make some financing institutions completely unsuitable to deliver sme products cost effectively. the implication of this is that greater effort must be placed on developing financial institutions that see sme financing as the

bwalya k e ng ’ andu : financing small - and medium - scale industries in africa keynote speech by dr bwalya k e ng ’ andu, deputy governor ( operations ) of the bank of zambia, to the united nations economic commission for africa expert group meeting on “ financing small - and medium - scale industries in africa ”, lusaka, 26 june 2012. * * * • the undp resident representative, ms khanni wignaraja ; • director of uneca, southern region office, ms beatrice kiraso • the afdb representative, dr fred kwesiga ; • officials from the ministries of finance of various countries ; • officials from various central banks ; development banks, commercial banks and other financial institutions ; • private sector representatives • participants ; • ladies and gentlemen ; i would like to firstly express my appreciation to the director of uneca, southern region office for extending an invitation to me to deliver the keynote address at the start of the experts group meeting of financing small and medium scale industries. i commend uneca for this great effort to bring together this assembly of high level officials and experts from government, the financial sector, private sector and academic institutions to discuss the vexing problem of enhancing financial flows to the sme sector in africa. i note from the very elaborate programme for this meeting that you will in the next three days cover a wide spectrum of issues some of which will focus on factors that constrain smes access to finance and some of which will focus on what needs to be done to change this situation. the meeting is, therefore, an opportunity for us to face a number of challenges that characterize this sector. these will include revisiting strategies and approaches to sme financing currently in use as much as it will require a review of current institutional arrangements through which finance is directly delivered to smes, on one hand, and those which indirectly obstruct or facilitate this flow of resources, on the other. however, i believe that probably the greatest challenge before this assembly is to attempt to narrow the gap between analysis of the problem and the implementation of measures and actions that work. meetings, workshops, seminars, etc. on sme financing are plenty at national, regional and international levels. some of you have had the opportunity to attend several of these meetings in the past. indeed, some of you have become experts at talking about the subject. barely two weeks ago, the bank of zambia held a financial sector forum here in lu