1.
Financing sustainable small- and medium-sized enterprises (SMEs) in Mozambique 1
Xiaoting Hou
Jones
December 2016
Author name
Date
Xiaoting Hou
Jones
December 2016
Financing sustainable small- and
medium-sized enterprises (SMEs)
in Mozambique
Money Where
It Matters

2.
Financing sustainable small- and medium-sized enterprises (SMEs) in Mozambique 2
Xiaoting Hou
Jones
December 2016
MozambiqueHigh poverty level: 54% population
High deforestation, high forest cover: 40.1 million
ha (51%) forests; 0.21-0.58% deforestation rate
(1970-2002).
Main drivers outside of forest sector: agriculture
SMEs very important:
Informality wide spread: 90.9%
SMEs accounts for 98.7% of
the total 26,264 registered
companies
Focus of the research: sustainable SMEs in forest
and agriculture sector in a forest landscape
Focus region: Zambezia

3.
Financing sustainable small- and medium-sized enterprises (SMEs) in Mozambique 3
Xiaoting Hou
Jones
December 2016
Sustainable SMEs
Capacities
Interests rate
Scale of investment
Rate of return
Repayment period
Grace period
Risk Management
Business, environment and
social
Market, climate Risks
10-
15%
Most require investment in
machineries
Poor infrastructure, high
fees keeping costs high
>=3 years
>=1 years
Commercial banks
Business
Collaterals, formality
Volatile interest rate,
current > 25%
Upper limits vary
6 months - 6
years but mostly
short term
Public sector
e.g. PRSP 10-14%; FDA,
FDD: 10%
FINAGRO: 70% grant for
equipment
Require no collaterals, risk
sharing (FDD, Landscape)
Provide technical support
(IPEME, CEPAGRI,
Landscape)
<= 3 years
?

4.
Financing sustainable small- and medium-sized enterprises (SMEs) in Mozambique 4
Xiaoting Hou
Jones
December 2016
Actively invest in
development since
1990;
Governed collectively
by private and public
sector with private
sector as the majority
shareholder;
Manages development
funding from
international
development partners

5.
Financing sustainable small- and medium-sized enterprises (SMEs) in Mozambique 5
Xiaoting Hou
Jones
December 2016
Sustainable SMEs
Capacities
Interests rate
Scale of investment
Rate of return
Repayment period
Grace period
Risk Management
Business, environment and
social
Market, climate risks
10-
15%
Most require investment in
machineries
Poor infrastructure, high
fees keeping costs high
>=3 years
>=1 years
Commercial banks
Business
Collaterals, formality
Volatile interest rate,
current > 25%
Upper limits vary
6 months-6 years
but mostly short
term
GAPI
30%-40% of funding
targeted for business
capacity building
Risk sharing program where
25%-75% loan is guaranteed
(administered through
commercial bank)
Central Bank Base Rate –
5%
E.g. 20,000 USD
average loan, with
50% of the loan
given as grant if
repayment schedule
is followed through
12 month-3 years;
but there are cases
that get longer period
Flexibility offered
through loan
restructured

6.
Financing sustainable small- and medium-sized enterprises (SMEs) in Mozambique 6
Xiaoting Hou
Jones
December 2016
The Capacity Building Gap: Zambezia
Province as an example
Managed by Programme
Capacity/Tota
l funding
Forestry Agriculture
Environment Social Business Environment Social Business
Public
Sector
IPEME
3
employees
X X
CEPAGRI
15
employees
X
Landscape Not defined X X X
FINAGRO
4
employees
X
PPP GAPI
30-40% of 50
million USD
X
NGOs
RADEZA
7
employees
X X X X
FONZA
5
employees
X X X X
CECOHAS
4
employees
X X X X
In Zambezia: 1,805 registered SMEs in a country where informality is estimated at 91%

7.
Financing sustainable small- and medium-sized enterprises (SMEs) in Mozambique 7
Xiaoting Hou
Jones
December 2016
Financing SUSTAINABLE SMEs
Is there finance for SMES?
Is the finance providing
the incentives/support
for socially inclusive and
environmentally
responsible SMEs?