SME financing Caught up by economic transformation

The Tunisian Financial System No Longer Meets the Real Needs of SMEs

The traditional model of financing SMEs is showing its limits in Tunisia. Companies are facing structural constraints that hinder their development. In this perspective, Mohamed Salah Frad, General Manager of United Gulf Financial Services-North Africa (UGFS-NA), emphasizes that "the main obstacle to the development of Tunisian companies lies in a persistent structural gap between their real needs and the nature of available financing." He explains that, until now, most bank financing has been oriented towards material investments, such as real estate, equipment, or physical assets.

Intangible Assets at the Heart of Value Creation

Frad recalls that the major challenge for Tunisian SMEs "is no longer just about acquiring machines," but now concerns the financing of innovation, intangible assets, working capital needs, and access to markets. This evolution occurs in a context where economic models have profoundly changed, with value creation relying more on technology, data, brands, platforms, organization, and the ability to innovate. However, these intangible assets remain difficult to finance through traditional instruments due to the lack of tangible guarantees.

The Growing Problem of Working Capital Needs

Added to this constraint is, according to him, "the growing problem of working capital needs," which has become critical in an environment marked by longer payment delays and increased tensions on cash flow. Moreover, the UGFS-NA leader stresses that "access to financing can no longer be dissociated from access to markets." A company without clear and recurring outlets, even if properly financed, remains structurally fragile.

The Limitations of the Banking System

If the banking system, in its current configuration, partially meets the needs of SMEs, it cannot, on its own, accompany the profound transformation of economic models. In this perspective, Frad considers that private equity, venture capital, and hybrid financial instruments constitute more adapted alternatives, provided they are part of a global vision integrating innovation and market access. These tools indeed allow for the financing of innovative projects, intangible assets, and high-risk but high-value creation growth phases.

Insufficient Mechanisms

However, he specifies that financing alone is not enough if it is not associated with mechanisms facilitating access to markets. He cites initiatives such as the "Small Business Act," which provides for the reservation of 20% of public purchases for SMEs and startups. "These mechanisms are going in the right direction but remain below expectations," he affirms, mentioning limitations in application and a still-low real impact on young companies.

The Need for a New Approach

According to Mohamed Salah Frad, it becomes essential to conceive financing as a lever in the service of structured sectors, in which companies integrate into complementary value chains, notably in sectors with high potential such as technology, green economy, and circular economy. In this framework, the role of the state remains central but must evolve. "It's not about the state substituting the market by directly financing companies," he explains, but rather intervening in a targeted manner to reduce investment risks and attract more private capital.

The Role of the State

This involves setting up innovative mechanisms like funds of funds, similar to the Anava fund experience, which he qualifies as "a relevant example to duplicate and strengthen." The state can also play a determining role through modern instruments such as "first loss" or "blended finance," which allow for risk sharing with private investors and make innovative or impact projects financeable. These tools are particularly adapted to emerging sectors, energy transition, circular economy, and new value chains. Finally, Mohamed Salah Frad advocates for better targeting of public subsidies. These, according to him, "should not be limited to compensating costs," but aim to facilitate access to markets, encourage the structuring of sectors, and support companies engaged in sustainable, innovative, and job-creating dynamics. It is "on this condition," he concludes, that SME financing can become a true engine of economic and social growth in Tunisia.