Driving Inclusive SME-Growth in Africa: Digital Transformation Pathways and the Catalyst Role of ESOs by Evans Edebor of PABL Solutions

In Africa, MSMEs represent over 90% of businesses, employ 63% of the workforce, and contribute more than 50% of the continent’s GDP.

With the AfCFTA unlocking a $3.4 trillion integrated market of 1.4 billion people across 54 countries, ESOs have an unprecedented opportunity to deliver scalable support that helps SMEs expand revenue and market share, accelerate job creation, and strengthen long-term enterprise sustainability.

In Nigeria, several factors continue to stifle SME growth opportunities and potential. These include limited access to mentoring, capital, markets, and affordable technology toolkits at scale.

This op-ed offers insights into understanding the market opportunity, SME development stages, digital landscape and transformation journey, and the role of ESOs as catalysts.

1.) The Market Opportunity

Under the AfCFTA Protocol on Trade in Goods, SMEs can explore opportunities across:

• 5,516 Tariff Lines/Product Classes in the General List
  
   
• 429 Tariff Lines/Product Classes in the Sensitive List
  
   
• 184 Tariff Lines/Product Classes in the Exclusive List
  
   

These are classified under 89 Tariff Headers (HS Codes), creating a pool of vast product classes and market opportunities across 54 African countries.

2.) SME Development Stages

1. Informal / Revenue Generation

This stage is characterized by loose structure, no formal registration, and income driven mainly by daily sales. The entrepreneur operates with minimal documentation and relies heavily on personal networks. The major pain point associated with this stage is lack of formal systems and compliance, which limits access to finance and growth opportunities.

2. Startup / Formalise

At this stage the business becomes legally registered, sets up basic structures, and establishes its first formal customers. Operations are still experimental as the founder tests the viability of the business model. The key pain point here is inadequate cash flow and weak operational processes.

3. Crisis / Survival

The company struggles with declining revenue, increasing costs, or operational inefficiencies that threaten continuity. Leadership is often reactive, making short-term decisions to stay afloat. The major pain point is liquidity pressure and inability to meet obligations.

4. Restructure / Rebrand

The SME begins overhauling its structure, processes, or brand to regain relevance and competitiveness. This may involve new products, new management approaches, or repositioning in the market. The main pain point is internal resistance to change and resource constraints.

5. Early Growth

The company has a validated business model and growing customer base, supported by improved processes. It begins expanding operations, hiring staff, and increasing production capacity. The key pain point is limited managerial capacity to handle expansion.

6. Growth / Scaling

The business scales rapidly across markets, regions, or product lines using more advanced systems and technology. Structured teams, SOPs, and performance management begin to emerge strongly. The major pain point is access to finance and aligning systems to support rapid expansion.

7. Established

The SME has stable revenue streams, predictable operations, and strong brand recognition. Governance structures and functional departments operate with clear roles. The key pain point is innovation fatigue and maintaining competitiveness in evolving markets.

8. Mature

The business reaches peak efficiency with optimized processes, strong market share, and consistent profitability. Growth becomes slower, and strategic decisions focus on diversification or transformation. The pain point is the risk of stagnation and failure to adapt to industry disruption.

9. Exit

The owner considers selling, transferring ownership, or closing operations after fulfilling business objectives. Systems and financials must be clean and attractive to buyers or successors. The key pain point is valuation, succession planning, and ensuring continuity without the founder.

3.) The Digital Landscape

The digital landscape covers three domains: Digital Novice, Social Media Seller, and Aspiring International Trader.

1.) The Digital Novice

Characteristics:
 Women entrepreneurs with limited or no prior experience using digital tools. They may feel that digital products are not for them and struggle to allocate consistent time for training due to family or home responsibilities.

Pain Points:
Challenges include lack of technical knowledge, low awareness of available digital options, difficulty understanding tools when instructions are unclear, high cost of digital platforms and data, and limited access to training tailored to their needs. Perceived unequal access to training compared to men also remains a barrier.

Suggested Training Support:
Training should focus on foundational digital literacy using practical, hands-on methods. It should begin with simple tools like WhatsApp Business and social media and be delivered in flexible formats such as micro-lessons. Awareness creation on available digital platforms is crucial. Mentorship and peer support can build confidence and reinforce learning.

2.) The Social Media Seller

Characteristics:
 A businesswoman active on platforms like Instagram, Facebook, and Twitter, using them effectively for product showcasing, marketing, and sales. She may also use basic tools such as WhatsApp Business or Bumpa.

Pain Points:
Though active online, she may not leverage full e-commerce capabilities. Challenges include integrating logistics services, managing payment issues (network errors, transaction failures, refunds), high content production costs, and repetitive customer management. Limited guidance on e-commerce platforms such as Jumia also poses a barrier.

Suggested Training Support:
 Training should focus on transitioning from social media to full e-commerce operations. Key areas include setting up online stores, customer acquisition, backend management, payment integration, and logistics partnerships. Support in creating cost-effective digital content and accessing subsidized technology or data bundles is also beneficial.

3.) The Aspiring International Trader

Characteristics:
 A businesswoman focused on scaling her enterprise and recognizing the importance of digital tools. She may already be trading internationally or planning to start within six months. She uses more advanced digital tools (accounting, inventory, project management, analytics).

Pain Points:
Barriers include limited access to export regulations, difficulty finding international buyers, high logistics and shipping costs, cross-border payment challenges, and limited financing. Accessing grants and advanced digital skills is difficult and information is not always easily available.

Suggested Training Support:
Training should include advanced digital tools for scaling, export compliance, cross-border payments, international logistics, and digital platforms for global buyers. Support to access funding, grants, mentorship, and networking with experienced traders and women’s business associations is essential.

4.) The Digital Transformation Journey

1. Digitization – Adoption of digital tools to support business processes.
   
    
2. Digitalization – Automation of business functions and systems.
   
    
3. Digital Transformation – Leveraging technology to innovate, create new business opportunities, and enhance customer value in driving the business model.
   
    

5.) The Role of ESOs as Catalysts

ESOs must evolve from simply offering training to actively building ecosystems where they provide impactful incubation and acceleration programmes.

They must leverage the SCALE framework to:

1. Deliver stage-based support

Match interventions to the SME’s development stage and digital persona.

2. Provide holistic digital transformation pathways

Focus on strategy, systems, governance, and market expansion—not just digital tools.

3. Strengthen export readiness

Support SMEs to comply with AfCFTA rules, standards, and digital trade protocols.

4. Facilitate access to digital financing

Enable SMEs to secure financing for technology adoption, digital tools, and export logistics.

5. Build cross-border networks and partnerships

Connect SMEs to suppliers, buyers, and regional value chains.

6. Advocate for inclusive digital policies

Promote gender-responsive, youth-centered, and MSME-friendly policies.

7. Drive ecosystem-wide digital literacy

Ensure women and youth are not excluded from Africa’s digital economy.

Conclusion

Africa stands at a pivotal moment as digital transformation, youth entrepreneurship, women-led innovation, and the AfCFTA converge to redefine the continent’s economic future. With the AfCFTA opening a huge market opportunity, the potential for catalyzing inclusive trade and enterprise growth has never been greater. The call to action is clear: ESOs must position themselves as digital transformation enablers and AfCFTA accelerators—building ecosystems where African women and youth-led businesses can innovate, scale sustainably, with measurable outcomes. By doing so, ESOs will not only drive enterprise competitiveness but also shape a more digitally enabled and inclusive African economy.

Written by Evans Edebor. Certified Business Development Consultant (CBDC)® l ITCILO and Microsoft Certified WiDB Trainer l AfCFTA Policy, Market Development, and Digital Trade Enabler l Member of the Nigeria ESO Collaborative.

Exploring Impact Capital As A Funding Option for SMEs

There are challenges in accessing capital from financial service providers experienced by Small and Medium Enterprises (SMEs) due to barriers like collateral and lengthy documentation requirements in compliance with banking regulations. It is therefore not a surprise that the financing gap in Nigeria for Small and Medium Enterprises stands at $158.1B, with unmet loan estimates put at over $32B. Even when small businesses scale through the difficult loan eligibility processes, the interest rate repayments are often too high to sustain their enterprises. Impact Investment is becoming a more appealing funding option due to these obstacles in taking traditional capital.

 

The Global Impact Investing Network (GIIN) defines impact investing as “investments made to generate positive, measurable social and environmental impact alongside a financial return.” These investments happen when funds are deliberately channeled into enterprises that pursue a triple bottom line – the propensity to generate financial, social and environmental impact. The landscape for Impact investing is growing with the Business Research Company reporting that the global impact investing market grew from $420.91 billion in 2022 to $495.82 billion in 2023, representing a compound annual growth rate (CAGR) of 17.8%. There is therefore a shift from private charitable giving to investing in impact financial instruments such as debt, private equity, public equity, and equity-like debt, which brings much-needed returns to the investor. Capital suppliers have realised the benefits of championing impact investing, which provides better outcomes for their stakeholders and shareholders by addressing problems identified in the Sustainable Development Goals. Some of these challenges are in the areas of education, gender equality, poverty, financial inclusion, etc.

76% of the World’s wealth, according to the World Inequality Report, is in the hands of just 10% of the global population. This is a clear indication of the potential that lies in advocating for more capital flow from this pool held by private individuals to address the glaring lack that the majority, especially in the global south, face, which Government or Formal Financial Institutions are limited by bureaucracy or funding challenges to address. The Norrsken Impact 100, which is a 2024 list of Norrsken partners, shows there is a large flow of capital into innovative solutions and businesses to solve some of these social problems. This is evidence that impact capital may be the much-anticipated option to businesses that target the world’s challenges without the high profit margins that attract commercial capital, especially for a country like Nigeria, where SMEs' contribution to GDP stands at 46%. Impact Investing is intentional about promoting transparency and accountability so funds are properly utilized with an expected below-market-rate return to the Investors. Unlike charity, which is based on donations, impact capital includes concessionary funds or blended finance with impact measurements put in place to report on proper fund utilization for transparency and accountability.

Promoting more impact investments will require partnerships and collaborations among stakeholders. Governments have the responsibility to create an enabling environment to support and unlock more impact funding, even as traditional aid is depleting with the shutdown of USAID and other countries opting to reduce allocations for foreign grants. This could be through legislation, tax rebates for companies that choose to invest in impact capital instruments or relaxing strict regulations on long-term funds like pension funds. Currently, regulatory bodies in Kenya, Nigeria and South Africa have recently made adjustments to reflect access to pension fund allocations towards priorities such as affordable housing. GSG Impact in their August 2024 Report, recognised Impact Investors Foundation (IIF)’s National Board for Impact Investments (NABII) efforts in promoting partnerships and identifying regulatory issues around financing gaps to access finance among SMEs in the key priority areas of Health, Education and Agriculture through Edutech, Health tech, Justice tech, Fintech, Mobility tech,

There is also a rise of impact entrepreneurs; some refer to social entrepreneurs who champion solutions to these pressing issues as innovators. A lot of examples abound of these men and women who are re-creating what a traditional business operation is, developing new enterprise eco-systems that conventional financial systems may not fund, even though they are profitable. These businesses are at different stages of growth right up to sustainability. They are also classified as Small and Medium Entrepreneurs as their business model is guided by Professor Muhammad Yunus' 7 Principles of Social Business, which are;

• The business objective will be to overcome poverty, or one or more problems (such as education, health, technology access, and environment) which threaten people and society; not profit maximization

• Financial and economic sustainability

• Investors get back their investment amount only. No dividend is given beyond the investment money

• When the investment amount is paid back, the company's profit stays with the company for expansion and improvement

• Gender sensitive and environmentally conscious

• Workforce gets market wage with better working conditions

• Do it with joy

Impact Investors Foundation’s Mapping and Analysis of Enterprise Support Organizations (ESOs) in Nigeria report uncovers critical insights and practical recommendations on innovative financing that can unlock more of Nigeria’s economic potential through the business innovation of SMEs. The Global Impact Investing Network (GIIN) in its 2023 report shows that investors plan to step up their capital allocation to emerging markets, with sub-Saharan Africa attracting more than half of these investments. Investors are beginning to see the continent as filled with several opportunities that give good return on investments and this is steering more innovative capital flow into countries like Kenya, Egypt, Nigeria and South Africa to close the pre-COVID 19 $2.5 trillion to $4.2 trillion post- COVID-19 pandemic funding requirement to achieve Sustainable Development Goals (SDG). There are now more than ever other sustainable funding options available for SMEs to choose from for their business.

-Ucha Unimke-Ulayi