Entrepreneurship Finance in Africa:The Role of Digital Transformation for Better Entrepreneurship Finance

Small and Medium Enterprises (SMEs) significantly contribute to a country’s overall economy, resource utilization, job creation, and catalyzing sustainable innovation in a manner that enables extensive diversity and inclusion. In Africa, SMEs and micro enterprises constitute about 90% of businesses, yet, financial vulnerability ranks as highest societal problem faced by SMEs, as traditional commercial bank loans to SMEs are expensive and decrease steadily in favour of large enterprises because they rate SMEs as high risk. Additionally, investors are increasingly eco-conscious, preferring sustainable finance, because of Sustainable Development Goals launched in 2015 and issues of climate change that have led to global call for sustainability. This strangulating finance gap hinders SMEs’ operation, growth and ability for job creation, contribution to GDP and catalyzing innovation &amp; resource utilization.<br/>The SMEs’ situation is exacerbated by the evolution of Artificial Intelligence (AI), which is currently too sophisticated and less of investment priority for most SMEs to learn and adapt. The challenge then is that the inequalities and developmental differences between large enterprises and SMEs in Africa will not only persist but also increase. There is a significant concern that if this is not addressed, the SMEs will fall more behind in technological advancement, which will make them even less attractive to banks and investors, resulting in increased SMEs financial vulnerability.<br/>There is, therefore, an urgent need to unlock access to finance to SMEs, to close the finance gap, and thereafter equip them with capacity &amp; skills to join the trail as part of the AI evolution, and leverage whatever opportunities AI presents, for their business operations and growth. SMEs’ financial and capacity readiness for AI will ensure that the benefits of AI are shared more equitably and leveraged more broadly, especially among the SMEs since they constitute the largest number of businesses and impact more lives.<br/>There is evidence of a growing body of literature from academic research in developing context; however, focus has been more on identifying &amp; re-establishing SMEs finance gap. Scholars have largely neglected critically investigating sustainable finance practices and how to increase SMEs’ access to such finance.<br/>