Profile spoke to Marco Abalroado, Managing Director of Acess Bank, on the sidelines of the signing of a memorandum between Acess Bank and the Local Content Association of Mozambique (ACLM), which aims to combine efforts and synergies to facilitate access to financing for SMEs in the value chains of megaproject opportunities in the energy sector and the oil & gas extraction industry to empower local content and promote sustainable economic growth in the country through financial training for the business community, with a special focus on the regions of Cabo Delgado and Inhambane.
Profile Mozambique: How does the signing of the memorandum of understanding between the Local Content Association of Mozambique (ACLM) and Access Bank, which aims to provide a line of financing for Small and Medium-sized Enterprises (SMEs) in the field of local content in Mozambique, materialize in practice?
Marco Abalroado: Obviously the first step is to provide the necessary conditions for companies to have access to credit, so that they can grow and respond to many of the projects we have today. So the first step was this, to have a formal agreement to not only empower companies from the point of view of financial inclusion, but also to understand how the financial market works, and what is needed to have access to credit, to have access to deposits, and based on this to create the foundations to start empowering our companies, particularly small and medium-sized ones, to be prepared to respond to the most varied projects, in this case, specific ones.
PM: It should be noted that we are obviously very focused on Cabo Delgado and Pemba, on the Oil & Gas megaprojects, but the aim is to create the capacity for small and medium-sized companies to be able to respond to the market. And how do we do that?
MA: As has been mentioned, often there isn’t the capital needed to give SMEs a boost and energize their activities and what we’re trying to do is create products and services that are tailored to these companies, and that we can create easier access to credit and empower the companies themselves at the same time.
PM: In financial terms, what is the total amount of credit that will be made available to companies through the agreement?
MA: We have a package for small and medium-sized enterprises, which as a whole is around 50 million dollars. Of course, we’d like to lend 50 million dollars all at once, but that’s not possible.
This package will be used under tripartite agreements, in which we have the large companies also taking responsibility for the risk of the small and medium-sized ones, but we believe that as soon as we manage to create awareness of the importance of companies formalizing themselves, the importance of having organized accounts and having the minimum necessary to respond to these projects, that the line will start to be used in a very strong way.
PM: Given the terrorism situation affecting Cabo Delgado Province, how will the local population be able to identify with and access the benefits offered by this program?
MA: Let’s see, it’s not just Access Bank, it’s all the financial institutions. I think it’s our responsibility, as financial institutions, to try to create as much support as possible for the population to solve their day-to-day problems, whether they are small and medium-sized, large or private. The banks’ responsibility also goes beyond just the financial part of the response we have to give.
So what we have to do, of course, is figure out what products are needed, what the real needs of the population are and then create products and services that allow us to do that. Yes, we are starting from a difficult situation, so the starting point is often much lower than in other provinces we have in the country and we have to be aware of that. We have to realize that there is a growth curve, and we have to create products that allow small and medium-sized companies, but also individuals, to participate in this life cycle that both individuals and companies will have in the near future.
And I think that we’re not in a very easy situation, it’s been more difficult, and I think that the government has done a lot to stabilize, and we’re increasingly in stable areas in Cabo Delgado province, but I also believe that by boosting the economy we’re going to create additional stability.
The two things are often, it seems, not linked, but they are often linked.
PM: Considering the tax burdens that often stifle SMEs, what are the requirements and regulations that will be implemented to allow SMEs to enter this line of credit?
MA: In fact, the barriers to entry aren’t really tax burdens. It’s formalization. For example, if I have a company that doesn’t have organized accounts, that isn’t registered, when I approach a bank and ask for credit, I don’t have the necessary basis to understand how much I can lend and whether or not the company has the capacity to repay.
Because often, without financial literacy, people themselves don’t understand how much they can pay each month and how much they can borrow. The work here is done on two levels. One from a financial literacy perspective.
The second is that it’s important for people to understand how a loan works, what their monthly payment will be, what they can afford on the basis of what they receive.
And then there’s a slight variation, as I tried to explain briefly, in relation to most banking products. Bank products usually require a guarantee.
These products that we have specifically designed, there is no real guarantee attached. So what we do is analyze the cash flow, the inflows and outflows of money in clients’ accounts.
Once again, this formalization is fundamental. The money has to at least pass through the financial system and into the accounts so that we can understand exactly how much these companies spend.
And from there, obviously depending on the amounts to be lent, we define how much we can lend to each of these companies.
MP: With regard to the amounts available, what is the estimate of the maximum amount that each company will be able to access through this credit package?
MA: It depends on formalization and whether there are guarantees.
We start with what can be called almost microcredit and then up to the amounts needed. The only thing that obviously varies within this product is the need for guarantees or associated real guarantees, for lower amounts they are not necessary, but obviously as we evolve, we go from 500,000 meticais to 2 million, to 10 million, to 20 million, obviously this level of guarantees is necessary.
Another part that is also important to mention is the importance of the value chain. We have pre-approved products within the Oil & Gas value chain, where we already know how the cycle works. As you know, we’re the largest bank in Africa’s largest economy, which has very strong expertise in Oil & Gas, it’s a sector we’ve mastered a lot and we’re going to take advantage of this and the knowledge we have to leverage our companies, as we’ve done in other countries.
PM: How many SMEs are expected to be covered and when will this package be available for SMEs to take advantage of?
MA: I hope that as many SMEs as possible, and if it’s not exactly on our side, it’s on the side of the SMEs and it’s also on the side of us as a society to pass on this knowledge and what is needed.
We’re not going to be able to have 50,000 or 100,000 trained SMEs, but if we look, and I was listening to the figure of 42,000, I believe it’s not 42,000, we probably have around 700,000, 800,000 small and medium-sized or micro small and medium-sized ones.
But if you look, they are indeed small and medium-sized enterprises, many have one employee, two employees, three employees, so it’s a question of formalization. We don’t have a specific target for the number, we have a target for the maximum possible.
I would be happy if over the next two years we managed to reach 10,000, 20,000 SMEs, which I think would have done the country a great service, and I say this not just on behalf of Access, but on behalf of the entire financial system. I think it’s essential for the financial system to start looking at SMEs as the strength and driving force behind our country’s development, because that’s what really happens. If we manage to have a strong small and medium-sized enterprise sector, we’re guaranteed a strong economy.
Follow our speaker’s career path on his LinkedIN page: Marco Abalroado
Brief Profile
Experienced country manager with a proven track record of working in the banking sector. Skills in business processes, negotiation, business planning, analytical skills and IT strategy. Strong business development professional.
