Microfinance Services for MSMEs






Business Model Description
Provide financing or deliver microfinancing products that provide loans, savings, insurance and related products to low-income groups and Micro, Small and Medium Enterprises (MSMEs) to ease access to credit and enable income-generating activities.
Expected Impact
Strengthen economic productivity and resilience of MSMEs and low-income households with access to affordable and reliable financing.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Eswatini: Manzini
- Eswatini: Hhohho
- Eswatini: Lubombo
- Eswatini: Shiselweni
Sector Classification
Financials
Development need
Financial inclusion in Eswatini has increased to 87%, yet inequalities remain. Low-income individuals and MSMEs, especially in the informal sector forming 80% of the labor market in 2018, confront difficulties in accessing financial services and credit. Limited infrastructure also constrains rural people's access to finance (1).
Policy priority
The National Financial Inclusion Strategy (2017- 2022) sets priorities to deepen financial inclusion and expand formal products. The National Development Plan 2019-2022 outlines an economic recovery based on inclusive and sustainable growth and creating an conducive environment for an export-oriented and employment-creating private sector (2, 3).
Gender inequalities and marginalization issues
Women have fewer opportunities in the formal economy, with only 20% of women-owned businesses formally registered. Merely 48% women have access to formal financial services, as opposed to 56% of men (1). The youth unemployment rate reached 46% in 2019 with only 17% formally employed (1), creating more financial exclusion at 17%, compared to 13% of adults (1).
Investment opportunities introduction
Opportunities exist in digitizing cash transfer programmes, incorporating information on MSMEs and providing credit risk information, diversifying financial instruments and implementing collaborations between banks and microfinance institutions as in the case of the central bank's credit guarantee schemes (8).
Key bottlenecks introduction
Challenges in financial inclusion relate to irregular income streams for low-income households; lack of a robust credit information system; limited infrastructure in rural areas; weak consumer protection and regulatory frameworks; limited access to financial services and credit for the informally employed; and lack of financial literacy (2).
Corporate and Retail Banking
Development need
Limited competition in Eswatini's banking sector results in high charges and low accessibility with only 52% of adults holding a bank account (4). Low income individuals, MSMEs and smallholder farmers lack access to credit from commercial banks due to limited collateral and transactional records, and 90% of MSMEs start their business with informal credit (5).
Policy priority
The Eswatini National Payment System Vision and Strategy Document 2021–2025 emphasizes improving digital payment services (6). Eswatini's Small, Micro and Medium Enterprise Policy (2018) targets include strengthening legislative and regulatory frameworks for MSMEs, supporting MSMEs owned by women and young people, and enhancing the competitiveness of MSMEs (7).
Gender inequalities and marginalization issues
Only 49% of women have bank accounts compared to 52% of men, while 47% of young adults were banked compared to 52% overall (1). While 65% of MSME are owned by women, only 13% of female business owners can access formal credit, compared to 19% for male owners (1).
Investment opportunities introduction
Opportunities exist in enhancing competitiveness and accessibility of Savings and Credit Cooperatives (SACCOs); supporting businesses in the informal sector with access to affordable credit, especially in rural areas; and developing technologies and ICT infrastructure to increase the use of e-money and to reduce remittance costs.
Key bottlenecks introduction
Challenges exist in mobile payments and services related to interoperability across banking and mobile payment systems (1), unfamiliarity and limited trust of consumers in technology, limited personal transaction cap reaching E 4,000 (USD 265), and inconsistencies in accessing mobile money services (2).
Consumer Finance
Pipeline Opportunity
Microfinance Services for MSMEs
Provide financing or deliver microfinancing products that provide loans, savings, insurance and related products to low-income groups and Micro, Small and Medium Enterprises (MSMEs) to ease access to credit and enable income-generating activities.
Business Case
Market Size and Environment
USD 50 million - USD 100 million
15% - 20%
The loan portfolio of micro, small and medium enterprises (MSMEs) in Eswatini was E 1.3 billion (USD 86.8 million) in 2018 (10).
Eswatini's Total Savings and Credit Cooperative Organization (SACCO) assets increased from E 1.3 billion (USD 86.8 million) in 2017 to E 1.5 billion (USD 100.2 million) in 2018 (11).
Total asset value for credit providers in Eswatini stood at E 4.6 billion (USD 304.7 million) in 2018, a 17% increase from E 3.9 billion (USD 258.4 million) in 2017 (11).
Indicative Return
20% - 25%
A prominent microfinance institution from Eswatini exhibits a growth rate between 30-40% year-on-year, with a return on investment of no less than 20% (12).
Investment Timeframe
Short Term (0–5 years)
Microfinance services are expected to take approximately 3 years to generate returns (12).
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Capital - Limited Investor Interest
Business - Supply Chain Constraints
Impact Case
Sustainable Development Need
Eswatini's financial sector is underdeveloped as 48% of the country's population is unbanked (13). The majority of the population lacks access to credit (9).
Micro, small and medium enterprises (MSMEs) confront difficulties in accessing credit due to high collateral and eligibility requirements. Only 10% of MSMEs manage to receive formal credit from financial institutions, which poses a major challenge for their growth and operations (14).
The economic slowdown caused by COVID-19 has led to lower profitability for MSMEs in Eswatini, which further increased the need for credit. In 2020, MSME profits declined by 2.5% to close at E 738.6 million (USD 49.36 million) from E 757.5 million (USD 50.63 million) observed in 2019 (10).
Gender & Marginalisation
While 65% of MSMEs are owned by women in Eswatini, they are likely to be the owners of less mature and under-developed businesses (14). 60% of the women-owned enterprises are in the micro-level stage (15) and show lower rates of growth due to women's lower access to education and capital.
Only 13% of female business owners are able access formal credit in Eswatini, compared to 19% of male owners (13).
Expected Development Outcome
Microfinance services for MSMEs improves their productivity while fostering economic growth as MSMEs generate 50-60% of value added and contribute to 33% of GDP in emerging markets (16), including in Eswatini where such businesses play a key role.
Microfinance services allows MSMEs expand their businesses and create employment opportunities for more than 90,000 people in Eswatini (9).
Microfinance services increase access to credit and financial inclusion for low-income households who are excluded from formal financing channels due to high collateral and eligibility requirements of commercial banks.
Gender & Marginalisation
Microfinance services for MSMEs promotes female entrepreneurship through increased access to financing for MSMEs, which are primarily owned by women (14), and enhances access to formal financing for lower-income individuals who are concentrated in rural areas.
Primary SDGs addressed

9.3.2 Proportion of small-scale industries with a loan or line of credit
46.86 % in 2016 (19).
Reducing the proportion of emerging business owners who do not save from 17% in 2017 to 8% by 2025 (20).

10.5.1 Financial Soundness Indicators
Nonperforming loans as a proportion of total gross loans stood at 9.2% in 2019 (10).
N/A

8.10.2 Proportion of adults (15 years and older) with an account at a bank or other financial institution or with a mobile-money-service provider
52% of the adults are banked and 67% of adults have a mobile money account. 87% of the population is financially included, 85% of which are use formal financial products (17).
The National Financial Inclusion Strategy targets to reach 75% of adults with access to two or more formal financial products and reduce the percentage of financially excluded people to 15% by 2022 (18).
Secondary SDGs addressed



Directly impacted stakeholders
People
Gender inequality and/or marginalization
Corporates
Public sector
Indirectly impacted stakeholders
People
Corporates
Outcome Risks
Microfinance services for MSMEs may lead to potentially high credit default risks due to lack of recorded credit history, which in turn may result in higher interest rates, negatively impacting both the financial institutions and the end consumers.
If financial implications of microfinance services are not understood, or required regulations are not in place, services may result in inability to pay back loans, especially for low-income households, which may lead to a debt-cycle negatively impacting their socio-economic position.
Tailored financial products may disrupt the current financial system and may decrease demand for loans issues by commercial banks, which may impact on their performance in the short term.
Impact Risks
If microfinance services do not reach businesses and households excluded from the current financial service offering, for example due to lack of financial literacy, the expected impact may be limited.
If MSMEs and households use the provided financing for consumptive, rather than productive purposes, the long-term socio-economic impact of the microfinance services may be limited.
Impact Classification
What
Microfinance services for MSMEs provide access to affordable and reliable financing to businesses and communities outside the formal banking system.
Who
MSMEs and underserved and unbanked low-income households especially in rural areas benefit from microfinance services.
Risk
While the model of microfinance services for MSMEs is proven, customer reach and utilisation of loans requires consideration.
How Much
Microfinance services for MSMEs help to meet the National Financial Inclusion Strategy goal of 75% adults having access to two or more financial products by 2022 (18).
Impact Thesis
Strengthen economic productivity and resilience of MSMEs and low-income households with access to affordable and reliable financing.
Enabling Environment
Policy Environment
National Development Plan, 2019-2022: Among the six strategic axes, the national outcome of enhanced and dynamic private sector includes the development of the microfinancing sector under the strategy to improve access to financing (23).
Industrial Development Policy, 2015-2022: Includes strategies on creating an enabling environment to support the development of MSMEs and enhancing MSMEs access to finance, which are seen as an important conduit for industrial diversification (9, 23).
Revised Micro, Small and Medium Enterprise (MSME) Policy of Eswatini, 2018: Includes the development of an effective, efficient and competitive microfinance sector to cater for the financial needs of micro businesses and facilitate graduation to mainstream finance among its main policy objectives (22).
Small and Medium-Sized Enterprise (SME) Roadmap, 2018-2022: Stemming from the MSME policy, the roadmap guides and supports the development of the small business sector in Eswatini. Its main focuses are economic diversification, SME growth and innovation (9).
Financial Environment
Financial incentives: The Central Bank manages the Export Credit Guarantee Scheme and the Small-Scale Enterprise Loan Guarantee Scheme to cover lack of collateral and risks associated with SMEs, which are offered to commercial banks and non-bank financial institutions (8).
Other incentives The Informal Traders Revolving Fund offers short-term loans to informal traders capitalized at E 4 million (USD 266,000) benefiting 200 businesses in the Manzini region. The E 45 million (USD 2.6 million) MSME Revolving Fund has approved 281 business loans (26).
Regulatory Environment
Central Bank Order, 1974: Mandates the Central Bank of Eswatini to promote, regulate and supervise the national payment system and to supervise banks, credit institutions and other financial institutions, including microfinance services (13).
Financial Services Regulatory Authority (FSRA) Act No. 2, 2010: Serves as the legislative framework for the operations of the FSRA and the regulation and supervision of Non-Bank Financial Institutions (NBFIs), including credit and savings institutions (11).
Savings and Credit Co-Operative (SACCO) Bill, 2018: Provides licensing and regulations for SACCOs, and regulate areas including governance, financial safety and compliance for such credit unions (13).
Consumer Credit Act, 2016: Regulates the provision of credit and consumer protection, including determining who can be provided with credit and prohibition of certain practices (13).
Citizens Economic Empowerment Bill, in progress: Aims to promote economic empowerment of the people through equal opportunities for all, including gender equality and rural-urban parity, improved access to resource and assets, and ease of doing business (9).
Marketplace Participants
Private Sector
Amandla Financial Services, Small Enterprises Development Company (SEDCO), Eswatini Bank, Nedbank, Standard Bank, Savings and Credit Co-Operatives (SACCOs) such as Asikhutulisane Yetfu Sonkhe, Saphumula Impumelelo and Imphilo Lenhle.
Government
Ministry of Finance, Ministry of Commerce, Industry and Trade, Central Bank of Eswatini, Financial Service Regulatory Authority, Center for Financial Inclusion, Financial Services Regulatory Authority, Micro Finance Unit, Eswatini Standards Authority (SWASA).
Multilaterals
African Development Bank (AfDB), Economic Commission for Africa (ECA), European Investment Bank (EIB), Association of African Development Finance Institutions, World Trade Organization (WTO).
Non-Profit
Proparco, Agence Française de Développement (AFD).
Target Locations

Eswatini: Manzini
Eswatini: Hhohho
Eswatini: Lubombo
Eswatini: Shiselweni
References
- (1) UNCDF & Finmark Trust. 2020. Eswatini Financial Inclusion Refresh. https://www.uncdf.org/article/6570/eswatini-financial-inclusion-refresh
- (2) Ministry of Finance. 2017. National Financial Inclusion Strategy for Swaziland 2017-2022. https://www.afi-global.org/publications/national-financial-inclusion-strategy-for-swaziland-2017-2022/
- (3) Ministry of Economic Planning and Development. 2019. National Development Plan 2019/2020-2021/2022. https://www.gov.sz/images/CabinetMinisters/NDP-2019-20-to-2021-22-final.pdf
- (4) UNCDF. 2021. Measuring Progress: Financial Inclusion in Selected SADC Countries. https://www.uncdf.org/article/7365/measuring-progress-2021-financial-inclusion-in-selected-sadc-countries
- (5) Deputy Prime Ministers Office. 2019. The Kingdom of Eswatini's Country Progress Report on the Implementation of the Beijing Declaration and Platform for Action. https://archive.uneca.org/sites/default/files/uploaded-documents/Beijing25/eswatini-beijing25_report.pdf
- (6) Central Bank of Eswatini. 2021. Eswatini National Payment System Vision and Strategy Document 2021–2025. https://cenfri.org/wp-content/uploads/Eswatini-National-Payment-System-Vision-2025.pdf
- (7) Government of Eswatini. 2018. Revised Small, Micro and Medium Enterprise Policy of Eswatini
- (8) Central Bank of Eswatini. Development Finance. https://www.centralbank.org.sz/development-finance/
- (9) United Nations Economic Commission for Africa & the Government of the Kingdom of Eswatini. Financing Model for Micro, Small and Medium-Sized Enterprises. https://www.gov.sz/images/MOCIT/Financing-Model-for-Micro-Small-and-Medium-Sized-Enterprises-MSMEs--Final-Wednesday-23-June-2021.pdf
- (10) Central Bank of Eswatini. 2021. Financial Stability Report. Issue.5. https://www.centralbank.org.sz/financial-stability-report/
- (11) Financial Services Regulatory Authority. March 2018. Annual Report. https://www.fsra.co.sz/about/annualreports/FSRA%20AR%202018.pdf
- (12) UNDP Stakeholder Consultation with FINCORP. January 2022
- (13) UNCDF & Finrmark Trust. 2020. Eswatini Financial Inclusion Refresh. https://www.uncdf.org/article/6570/eswatini-financial-inclusion-refresh
- (14) Finmark Trust. 2017. FinScope Micro, Small and Medium Enterprise Survey Eswatini 2017 Report. https://finmark.org.za/system/documents/files/000/000/214/original/FinScope_MSME_Report_Eswatini_2017.pdf?1601980048
- (15) Deputy Prime Ministers Office. 2019. The Kingdom of Eswatini's Country Progress Report on the Implementation of the Beijing Declaration and Platform for Action. https://archive.uneca.org/sites/default/files/uploaded-documents/Beijing25/eswatini-beijing25_report.pdf
- (16) United Nations Department of Economic and Social Affairs. 2020. Micro-, Small and Medium-sized Enterprises (MSMEs) and their role in achieving the Sustainable Development Goals. https://sdgs.un.org/sites/default/files/2020-07/MSMEs_and_SDGs.pdf
- (17) UNCDF. 2021. Measuring Progress: Financial Inclusion in Selected SADC Countries. https://www.uncdf.org/article/7365/measuring-progress-2021-financial-inclusion-in-selected-sadc-countries
- (18) Minister of Finance. 2017. National Financial Inclusion Strategy. https://www.afi-global.org/publications/national-financial-inclusion-strategy-for-swaziland-2017-2022/
- (19) United Nations Statistics Division. 2020. SDG Indicators Database. https://unstats.un.org/sdgs/UNSDG/countryprofiles/SWZ#goal-9
- (20) United Nations Eswatini. United Nations Sustainable Development Cooperation Framework (UNSDCF) 2021-2025. https://unsdg.un.org/sites/default/files/2020-11/Eswatini_UNSDCF_2021%20to%202025_1.pdf
- (21) UNDP & UNCDF. 2020. Eswatini Energy and the Poor Unpacking the Investment Case for Clean Energy. https://www.undp.org/sites/g/files/zskgke326/files/publications/UNDP-UNCDF-eSwatini-Energy-and-the-Poor.pdf
- (22) Government of the Kingdom of Eswatini Ministry of Commerce. 2018. Revised SME Enterprise Policy of Eswatini. https://en.unesco.org/creativity/sites/creativity/files/qpr/revised_final_final_smme_national_policy_11-05-2018_1_1.pdf
- (23) Government of the Kingdom of Swaziland. Industrial Development Policy 2015-2022. https://www.gov.sz/images/MOCIT/Industrial-Development-Policy-2015---2022-Swaziland-FINAL-AND-ADOPTED.pdf
- (24) Eswatini Economic Policy Analysis and Research Center. 2019. Economic Impact Analysis of Credit Guarantee Schemes in Eswatini: A Case of the Small Scale Enterprise Loan Guarantee Scheme (SSELGS). https://media.africaportal.org/documents/Economic-Impact-Analysis-of-Credit-Guarantee-Schemes-in-Eswatini-A-Case-of-the_QyhSyib.pdf
- (25) Proparco. April 2019. Proparco Carries Out its First Operation in Eswatini. https://www.proparco.fr/en/actualites/proparco-carries-out-its-first-operation-eswatini
- (26) Ministry of Finance. February 2022. Budget Speech 2022. https://www.gov.sz/images/CabinetMinisters/Budget-Speech-2022---FINAL.pdf