Objectives of German Sparkassenstiftung Project in Southern Africa

Promotion of Small-Scale Entrepreneurship in Southern Africa


German Sparkassenstiftung has been active in the Southern African region for many years. The regional project combines Sparkassenstiftung's existing and planned project activities in Southern Africa (based on previous experience in the project countries) with the aim of  

  • facilitating project coordination and steering from a single source.
  • promoting a strengthened South-South dialogue between the respective project partners and actors. For example, the central banks of Zambia and Malawi are already project partners or target groups. The implementing partner of the Farmers Business Simulation (FBS), the New Apostolic Church Relief Organisation (NACRO), serves Malawi, Zambia and Zimbabwe. The Zambian implementing partner Women's Entrepreneurial Access Center (WEAC) is part of an initiative of the Southern African Innovation Support Programme of the Finnish Ministry of Foreign Affairs with ministries from Botswana, Tanzania, Zambia and South Africa as well as the Ministry of Higher Education, Training and Innovation in Namibia.
  • facilitating and optimising the sharing of resources and experience. In addition to the exchange of experience and mutual use of local trainers, more specialised advisory needs can be bundled and expertise exchanged.

At the same time, the newly created regional project in all countries addresses the common goal of promoting economic activities and employment through self-sustaining activities of small enterprises and thus alleviating the problems of highly unequal income distribution and underemployment. The approaches in Malawi to improve access to financial services through education for microfinance institutions (MFIs) and their supervisory authorities as well as the Zambian approach to make small enterprises "bankable" through training complement each other. In Namibia, the urgent need for basic financial and business education for the target group was already recognised in the previous project. The Malawian partner LUANAR in particular can contribute to the development of the business games with its agricultural expertise and academic background and at the same time benefit from their methodology.

All project countries have a clearly unequal distribution of income in common. There is an explicit poverty problem in all of the four project countries. In Malawi, the situation is aggravated by rapid population growth. The economic framework conditions for MSMEs are characterised by challenges in all project countries, such as difficult access to appropriate and affordable formal financing opportunities. On the demand side, there is a high need for small enterprises to improve their commercial knowledge and management skills in order to realise sustainable growth, create employment and gain resilience to internal and external risks.

Often these enterprises are too small to be effectively and sustainably financed by financial institutions. A major cause is the unattractive small credit volume and the relatively high processing costs. One reason for this are credit assessments that require the bank's own assessment, in contrast to large, commercially savvy customers.
Due to the often significant lack of financial competence of small entrepreneurs, their bankability suffers. 
The ability to define financial needs and represent them to the bank, e.g. through meaningful documents and concepts, suffers due to the often significant lack of financial competence of small entrepreneurs. Lack of financial literacy exists particularly in the areas of knowledge, command and understanding of money, business investment and financing. 
The reasons that financial institutions cite for not serving this client segment are such as lack of proper accounting, lack of cash flow management or bankable business plans, lack of understanding regarding loan application requirements, lack of credible and traceable credit history and collateral. At the same time, the client segment is often not economically attractive for profit-oriented banks compared to other opportunities in the banking sector. Financial illiteracy combined with governance inadequacies thus hinders business growth and access to finance. 
Hence, the need for education starts with general basic education (confident articulation and calculation of loan applications) and basic financial education of potential entrepreneurs. 

On the supply side, microfinance institutions and their supervisors need to secure their sustainability more strongly through good quality work and gain trust, which ultimately leads to saving deposits from the population. Especially in difficult economic conditions, mobilising savings from their own clients is an essential source of refinancing for the lending business of local financial institutions. In addition, good savings formation protects individual households in emergencies and injects additional money into the formal monetary cycle. This confidence is ultimately based on appropriate and safe lending, which is supervised and regulated by the supervisory authorities. 

The current consequences of the Corona pandemic are hardly foreseeable against the background of the local health systems. The project countries have different preconditions and react differently to the pandemic. Regardless, significant negative consequences for the economy, employment and government revenues are expected. In this situation, where states can become insolvent and unable to act, self-employment and entrepreneurship is, more than ever, a suitable instrument to realise or secure income, economic activity and employment. Thus, especially in the Corona crisis, the preservation and strengthening of entrepreneurship and of enterprises that have already proven their viability in the market is an important instrument to promote economic resilience and employment independently of state action.

Deutsche Sparkassenstiftung für internationale Kooperation e.V.
Regional Office Southern Africa:
Lusaka Telecom House
Plot No. 5, Mwaimwena Road – Rhodespark Area

Lusaka, Zambia