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MICROCAPITAL BRIEF: Cenfri, Cornerstone, GLEIF, London Stock Exchange Collaborate on Legal Entity Identifiers (LEIs) to Boost Financial Inclusion of SMEs in Africa - MicroCapital

Four organizations recently launched an effort to equip small and medium-sized enterprises (SMEs) in Africa with Legal Entity Identifiers (LEIs), which are 20-digit codes linked to “business card and ownership structure information about a legal entity which can be verified quickly and efficiently by anyone, anywhere, enabling organizations to know precisely with whom they are doing business.” The participating entities are the Center for Financial Regulation and Inclusion (Cenfri), a nonprofit think tank based in South Africa; Cornerstone Advisory, a US-based firm; the Global Legal Entity Identifier Foundation (GLEIF), a Switzerland-based nonprofit; and the London Stock Exchange Group (LSEG), the UK-based entity that is issuing the LEIs. NMB Bank Limited, a Zimbabwe-based commercial bank, served as the project’s first validation agent, helping its customers access LEIs.

Among the goals of the efforts are to: (1) increase the transparency of “key reference information” on potential borrowers to decrease lenders’ risk; and (2) assist SMEs in complying with anti-money laundering and know-your-customer regulations.

The Managing Director of Cornerstone Advisory, Yann Desclercs, said, “The increasingly stringent customer due diligence requirements of the evolving international regulatory environment has, over the past years, contributed to an increase in SME trade finance rejections by banks. This is an important limitation to the growth potential and global outreach of African SMEs.”

Barry Cooper, the Technical Director at Cenfri, argued, “The LEI is one of the few initiatives with real potential to meaningfully address the challenges of de-risking in developing markets. The high costs of institutional due diligence and information asymmetries is a core element of the exclusion of small and medium enterprises, and even some corporates, from regional and international markets. A robust global enterprise identity opens up an under-represented large base of SMEs and women-owned businesses to trade across Africa as well as across the global markets.”

By Bradley Shulman, Research Associate

Sources and Additional Resources

ITWeb article

Cenfri press release

GLEIF press release ??

NMB Bank Limited homepage

Cornerstone Advisory homepage

LSEG homepage

Cenfri homepage

GLEIF homepage

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