Inaugural Lecture: Prof Ashenafi Beyene Fanta
Contact information
Prof Reza C. Daniels, Dean of Economic and Management Sciences, invites you to join us as we celebrate this milestone in the remarkable academic journey of Prof Ashenafi Beyene Fanta.
Prof Ashenafi Beyene Fanta
Stellenbosch Business School
Faculty of Economic and Management Sciences
Title: Rethinking SME finance: what works, what doesn’t, and why it matters
Event details
Date: Thursday 7 May 2026
Time: 17:30 SAST
Venue: Stellenbosch Business School, Protea (2058) and Honeybush (2059), Bellville Park campus
Format: Hybrid event
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Rethinking SME finance: what works, what doesn’t, and why it matters
Small and medium enterprises (SMEs) contribute to economic development by increasing national output, creating jobs and reducing income inequality and poverty. SMEs also serve as vehicles for entrepreneurship, thereby driving economic growth. Additionally, they can foster sustainable development if they are integrated into community development. However, most SMEs fail: In the United States, for instance, only 20% of SMEs survive the first year, and a mere 3% remain in business after the first five years. In developing countries, and especially in sub-Saharan Africa, the failure rate is even higher.
Although various factors contribute to SMEs’ lower survival rate, finance stands out as a major impediment to survival and growth. A lack of finance severely restrains the development of the SME sector, and is often caused by both traditional financing barriers and external constraints. High collateral requirements tend to exclude many businesses from formal loans, particularly in countries where owners lack sufficient assets to pledge. Even when collateral is available, high interest rates and additional lending costs make borrowing unattractive, leaving SMEs reliant on personal savings or informal sources. Compounding these challenges is the issue of information asymmetry, which increases perceived risk for banks and reduces their willingness to lend, since many SMEs lack proper financial records. Beyond these direct financing obstacles, external constraints that further limit SME growth include weak financial infrastructure, inefficient legal systems and underdeveloped capital markets, all of which create systemic barriers to credit access.
Promising approaches to SME finance combine technological innovation, alternative funding channels and supportive policy reforms. Fintech solutions such as peer-to-peer lending, crowdfunding and data-driven credit assessments have reduced transaction costs and expanded access to capital, particularly for SMEs lacking formal records. Complementary non-bank financing options, including venture capital and leasing, offer more flexible terms, while mobile banking and digital payments enhance liquidity and accessibility. At the policy level, measures such as the digitalisation of business processes, credit guarantee schemes and tax incentives have proven effective in reducing systemic barriers, collectively fostering greater financial inclusion, SME growth and broader economic development.
Still, traditional banking practices remain a major obstacle for SMEs, as rigid lending criteria, high costs and information gaps continue to exclude many businesses from accessing credit. High collateral demands, standardised assessments and extensive paperwork often disqualify SMEs lacking formal records, while steep interest rates and servicing fees make loans financially unsustainable. Banks’ risk aversion, fuelled by information asymmetry and unreliable credit histories, further limits lending opportunities, reinforcing the cycle of exclusion and financial vulnerability for SMEs.
Policy shortcomings and challenges in fintech adoption also hinder SME finance. Over-regulation, corruption and outdated frameworks discourage SMEs from pursuing formal financing, while limited government support fails to provide adequate infrastructure, credit guarantees or incentives for lenders. Although fintech offers promising alternatives, its effectiveness is constrained by low technological penetration, limited digital literacy and regulatory uncertainty in many developing regions. These factors prevent SMEs from fully benefiting from innovative financing solutions, leaving persistent gaps in access to capital and growth opportunities.
Improving SME finance requires public-sector commitment to the expansion of digital infrastructure as well as credit guarantee schemes that would reduce lending risks for banks. Strengthening regulatory frameworks is equally important, particularly in adapting to fintech innovations, as enhanced regulation ensures investor protection and fosters an environment conducive to financial inclusion and innovation. Financial institutions must complement these efforts by designing SME-specific financial products with lower collateral requirements and flexible repayment terms. Integrating fintech-driven credit assessments and data analytics can help bridge information asymmetry to enable more accurate risk evaluations and reduce default rates.
Biography
Ashenafi Beyene Fanta is a professor at Stellenbosch Business School, where he heads up the MPhil programme in Development Finance, and teaches and researches financial development, small and medium enterprise (SME) finance, and financial inclusion. His career reflects a sustained commitment to understanding how financial systems shape economic outcomes across countries, firms and households.
He holds a PhD in Corporate Finance from Johannes Kepler University Linz in Austria. Over the years, he has built an international academic and policy-oriented career spanning Ethiopia, South Africa, Colombia and broader global collaborations.
Prof Fanta’s research lies in the field of financial economics, with a particular focus on the role of finance at both macroeconomic and microeconomic level. His early work contributed to the long-standing debate on finance and economic growth by addressing critical measurement gaps in the literature. Notably, he introduced the role of bond markets into the assessment of financial development, highlighting their importance in channelling long-term capital to the private sector. This work led to publications in respected journals and was presented at leading international conferences.
His research agenda later evolved towards more policy-relevant and data-driven inquiries at the firm and household level. At the firm level, he has examined how financial access influences business performance, with a particular emphasis on SMEs. His work on relationship lending and collateral constraints in SME finance received an award for best paper from Taylor & Francis. He has also explored the role of formal and informal finance in supporting firm growth across African economies.
At the household level, his research investigates the relationship between financial inclusion and welfare outcomes, including poverty, vulnerability and subjective wellbeing. His contributions in this area have gained international recognition and have informed both academic debates and policy discussions.
More recently, Prof Fanta has expanded his research into infrastructure finance, recognising its critical role in economic development and poverty reduction. He has contributed to book chapters and supervised postgraduate research in this area, while also engaging directly in policy and advisory work. His expertise has been sought by institutions such as the Development Bank of Southern Africa, and he has also contributed to a World Bank initiative on economic corridor development. As a research fellow of the Kiel Institute for the World Economy, he collaborated on work examining the risk pricing of Chinese loans to African countries.
Beyond his research, Prof Fanta has played a significant role in academic leadership and mentorship. He has led PhD programmes, supervised numerous master’s and doctoral students to completion, secured competitive research funding, and contributed extensively to academic peer review and editorial processes.
Through his scholarship, teaching and policy engagement, Prof Fanta continues to advance our understanding of how financial systems can better support inclusive growth, enterprise development and improved welfare outcomes, particularly in the African context.