Small and medium-sized enterprises (SMEs) play a vital role in developing countries, especially in poor neighbourhoods in sub-Saharan Africa (SSA). In many SSA countries, these businesses help achieve key United Nations Sustainable Development Goals (UN-SDGs), such as creating job opportunities and fostering sustainable economic growth (SDG 8). For instance, in Zambia, SMEs are responsible for 88% of jobs; in Ghana, they create 80% of employment; and in South Africa, they provide around 60% of jobs. Additionally, SMEs drive innovation (SDG 9), which is crucial for transforming the lives of people who often live in poverty.
However, financial challenges hinder these businesses’ ability to innovate and improve productivity. Despite these difficulties, they are working to solve social issues by introducing much-needed technology-driven services to poor neighbourhoods. For example, some SMEs offer digital currency systems that help people access essential needs like clean water, food, and healthcare.
With an estimated population of over 1.2 billion people living in the SSA region (according to a UN report from 2019), it’s essential to understand where SMEs get the financial resources they need to innovate, operate, and survive. Since formal financial systems often don’t work effectively, this study introduces the concept of a ‘non-mainstream financial scheme’ to describe the various funding sources available in the SME ecosystem of these developing countries. The study also highlights how these businesses use these informal financial resources to support their innovation efforts.
