Data - already produced, stored and increasingly secure across Africa - is opening a new avenue for financing: collateral based on actual business flows rather than on assets that are often non-existent, according to Mohamed H'Midouche, former international banker and executive director of the Inter Africa Capital Group (IACG).
The main obstacle to financing African SMEs is neither a lack of viable projects nor scarcity of financial resources. The challenge lies in a structural mismatch between traditional collateral requirements and the economic reality of the businesses that need funding. Mortgages, land titles, personal guarantees or sovereign guarantees remain the norm, yet they are out of reach for the majority of SMEs. As a result, significant amounts of capital remain tied up, while the real economy operates below its potential.
Data can play a decisive strategic role in bridging this gap, not as a marginal technological tool, but as a category of economic collateral based on observable, traceable and verifiable activity flows. A company's creditworthiness is increasingly measured not just by what it owns, but by what it demonstrates over time.
From a banking and institutional perspective, data constitutes verifiable intangible capital that reduces information asymmetry between the company and the financier. To ignore data as a mobilisable asset is to maintain a costly paradox: dynamic yet underfunded SMEs facing financial resources that are available but insufficiently deployed.
Data can take several forms. It is transactional, reflected in receipts, disbursements, volumes and the regularity of flows observed via bank accounts, mobile money and payment platforms. It is relational, captured in electronic invoices, customer-supplier relationships, order histories and registration in value chains. It is behavioural, evidenced through payment discipline, income stability and adherence to contractual commitments. Finally, it is institutional, demonstrated through tax and social compliance, licences, contracts, insurance and administrative data.
The aggregation of these dimensions forms what can be called "data capital," which can support cash flow guarantees where traditional asset-based collateral is lacking. Data does not replace conventional guarantees; it enhances credit assessment, refines risk pricing, and enables contractual mechanisms backed by actual cash receipts.
This approach aligns with international prudential standards. The Basel III agreements, developed by the Basel Committee on Banking Supervision and hosted by the Bank for International Settlements, emphasise the quality of lending, risk measurement, and robustness of internal processes. The BCBS 239 standard, adopted after the global financial crisis, recognises the importance of comprehensive, reliable and readily available risk data for managing portfolios and demonstrating the soundness of credit decisions. Far from circumventing banking prudence, data-driven finance modernises it by strengthening risk assessment, dynamic portfolio monitoring and decision traceability.
International experience demonstrates that integrating data into SME financing is neither experimental nor marginal. In Europe, open banking, reinforced by the Data Act, structures access, sharing and economic use of consented data, providing a clear legal framework for its financial exploitation. These mechanisms have improved risk analysis beyond traditional balance sheets by relying on actual business flows.
In the United Kingdom, smart data is used as a lever for competition and financial inclusion, facilitating access to credit without relaxing prudential requirements. In India, the Account Aggregators system allows companies to control and share their financial data with explicit, traceable and reversible consent, creating a trusted infrastructure for credit. In Singapore, the monetary authority promotes data-centric finance to improve capital allocation while strengthening governance.
The common lesson is clear: data becomes financeable when it is standardised, consented to, governed and integrated into robust prudential frameworks. Africa does not need to invent a model from scratch, but can intelligently adapt these proven practices to its economic and institutional realities.
Development finance has long-established risk-sharing mechanisms. Partial Risk Guarantees and Partial Credit Guarantees offered by the African Development Bank (AfDB) and the International Finance Corporation (IFC), alongside guarantees from the Africa Guarantee Fund and Fagace, have broadened SME access to credit and strengthened local bank confidence. Yet their impact remains constrained by financial limits, mobilisation costs and often cumbersome processes.
This is where data introduces a decisive innovation. While institutional guarantees mainly cover risk after the fact, data acts at the stage of credit analysis and structuring. It enables a more detailed assessment of SMEs based on actual business flows, facilitating more accurately calibrated guarantee requests. Data thus becomes a lever to multiply the impact of existing mechanisms.
For institutions such as the World Bank and the IFC, which have long financed African SMEs, integrating data into credit risk analysis represents a gradual and controlled evolution of practice. Challenges such as scaling, legal harmonisation, personal data protection and cybercrime prevention are implementation issues rather than matters of principle. Both organisations are already addressing these through programmes on digital public infrastructure, inclusive finance and data governance. In this context, data emerges as a tool to reduce information asymmetry, improve lending quality, and secure SME portfolios.
Data is a strategic asset and therefore a target. The rise in cyberattacks against African financial institutions highlights the importance of cybersecurity, business continuity plans and digital resilience. Investments in regional data centres, such as NOSi in Praia, Cape Verde, where critical data for several ECOWAS countries is hosted and secured, demonstrate major progress. Data sovereignty, redundancy and security are increasingly in place, though recognition of data as an economic asset remains to be finalised.
The African Legal Support Facility (ASLF) of the AfDB can play a structuring role in this transition. Its expertise could help states, central banks and financial institutions adapt legal frameworks, contractually secure data use, and encourage lenders to recognise data as a credible, complementary guarantee.
The question is no longer whether data can complement traditional guarantees, but whether financing actors are prepared to evolve their instruments to reflect the economic reality of African SMEs. The data exists, the infrastructure is in place, prudential standards permit its use, and guarantee mechanisms can amplify its impact.
To ignore data as a mobilisable asset is to perpetuate a costly paradox: dynamic but underfunded SMEs confronting available but underutilised financial resources. Banks, lenders and regulators must ask themselves whether they are ready to recognise data as a credible guarantee for unlocking sustainable financing and supporting Africa's economic transformation.