LSEG, GLEIF, among international players in LEI issuance project for Africa SMEs

An international flagship project designed to expand financial inclusion among small to medium sized enterprises (SMEs) especially on the African continent has launched. The project has been realized with the support of the German Federal Government through the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH.

The collaborative initiative is equipping SMEs across Africa with globally recognized business identities, in the form of Legal Entity Identifiers (LEIs). The LEI is comparable to an international company ID card; it contains good quality 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 verifiable company data results in transparency in the marketplace and builds greater trust between market participants.

Supplying LEIs to African SMEs aims to strengthen financial inclusion in the region by enabling them to apply for trade finance and establish contractual, regulated agreements with banks, payment networks and trading partners, leading to broader access to financial services and greater participation in both domestic and international markets. Ultimately, the intention of the initiative is to strengthen Africa’s SME base and increase the flow of inbound capital needed to fuel the continent’s economic development.

By working with African banks to enable them to issue LEIs, the initiative not only addresses financing challenges, but also aims to dramatically reduce the compliance burden associated with stringent anti-money laundering (AML) and know your customer (KYC) regulations. Today, this overhead routinely prevents banks from lending to new African SMEs due, in large part, to ID validation and verification difficulties.

Using the LEI for identifying legal entities in cross-border trade could also enable banks to significantly reduce both cost and effort in data reconciliation.

The LEI initiative is a collaborative effort between: the Global Legal Entity Identifier Foundation (GLEIF), a not-for-profit founded by the G20 and Financial Stability Board which manages the global network of LEI issuing organizations and supports the availability of the Global LEI System; London Stock Exchange Group, which is the initiative’s LEI issuing organization; – Zimbabwe’s NMB Bank, which is equipping local SME customers with LEIs; the Centre for Financial Regulation and Inclusion (Cenfri), an independent, not-for-profit think tank which works on African financial sector development; and Cornerstone Advisory, which specializes in financial sector advisory and training services.

Alberta Abbey, LEI analyst in LSEG’s Data & Analytics division, said in a statement: “LSEG joined this initiative to facilitate wider LEI adoption across Africa. By demonstrating the uses and benefits of Legal Entity Identifiers, our aim is that this project will encourage more entities across Africa to obtain LEIs. We started the project with a partnership approach, which we intend to continue beyond the pilot.”

Stephan Wolf, CEO of GLEIF, said in a statement: “The LEI has the potential to create a more transparent, efficient cross-border exchange of goods and data under the African Continental Free Trade Area. This is the first step toward greater financial inclusion and overcoming the challenges associated with access to trade finance in Africa. Considering the high pace of digitization and regulatory development across the African continent, the LEI is a great natural fit. It is a compelling, ready-to-go cross-border solution for entity identification that is open, reliable and easily integrated into regulatory frameworks.”

Viola Pamela Ndlovu, head of Compliance at NMB Bank, said in a statement: “In view of the emergence of a digital era and the rapid increase in demand for greater transparency by all organisations including regulators across the World, securing a LEI has become a powerful tool that organisations can rely on in fulfilment of know your customer/business principles.”

Read the full release

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