Small businesses make up a vast section of the economy, yet struggle to access finance—Michael Monari, CEO of Longitude Finance, discusses how to reduce lending risk and boost SMEs.

There is a familiar cycle in discussions of financing for micro-, small- and medium-sized enterprises (MSME). Small businesses are engines of economic growth and need loans to grow; loans are readily available, but only to those with collateral and low risk—two rare factors in small businesses. Suddenly we are back where we started.

It is possible that banks, limited by restrictive lending requirements, may not be the perfect vehicles for MSME finance. This at least is what Michael Monari, CEO of Longitude Finance, thinks. After years working for large commercial banks such as Ecobank, Monari embarked last year on the plan for Longitude Finance, a group that would specifically target business that ordinarily have no collateral to access loans from a normal commercial bank.

“Over the years, I have noted that businesses very low on the ladder—those that appreciate loans of low amounts and have no security nor proper records of their business—have always been ignored or rejected by mainstream banks,” he said, adding that these business often have the potential not only to repay the loans and grow their businesses, but also support their families and several employees.