HomeBase MetalsOp-ed: The importance of increased financial inclusion of the ASM sector

Op-ed: The importance of increased financial inclusion of the ASM sector

The ASM sector has recently garnered renewed interest in many mineral rich countries in Africa. The potential of the sector in inducing economic development has always been a lure to proponents of enhanced broad-based development within the continent.

AUTHOR: Selina Zhuwarara, principal consultant at Autem Mining

It is agreed that one of the critical inputs to increasing the sectors’ operational capacity lies in widening access to financial resources and services within the sector.

Whilst the sector represents the largest component of the mining industry in terms of participants, it largely remains unable to access adequate capital or debt which is critical for its growth.

By all accounts, mining is a capital-intensive industry, and the large-scale mining sector has been able to grow and increase its capacity due to its sustained ability to attract capital and debt at appropriate times.

Whilst the requirement for capital is also high in the ASM sector, the ability of the sector to access commercial capital, investment or debt has largely remained limited.

There are significant impediments to achieving comprehensive financial inclusion and widening financial options in the ASM sector. The common hinderances cited include the typical informal nature of the sector, poor liquidity and difficulties in conducting due diligence and risk assessment on the entities and persons requiring the services.


Consequently, the sector has remained an unattractive stakeholder to traditional financial systems that have traditionally supported the mining industry.

The cumulative result has been to marginalize a significant component of the small-scale mining industry from being able to access a wider range of commercial financial services.


Notwithstanding the same, it is interesting to examine how the sector has internally dealt with its needs. The sector has developed inbuilt financial products and services which are unique to its capacity, form and scale.

Though not adequately sufficient or universal in their impact, the sector has managed to produce uniquely scaled services and products to support their operations. Particular attention is given to how the artisanal mining sector has dealt with financing. The sector relies on its own internal stakeholders or value chain participants to assist miners to access much needed capital for their operations.


Financiers have emerged in the form of concession owners, buyers, millers/ processing agents or stand-alone sponsors who offer capital to miners in exchange for a portion of the product recovered by the miners. In the case of concession owners, they allow artisanal miners to mine on their land on a product or revenue sharing arrangement.


In the case of millers, most provide milling and processing services or even debt in exchange for a percentage of the product or on a revenue sharing basis which may be revolving in nature. The same applies for buyers or standalone sponsors who hedge on established relationships with the miners to advance support in the form of hard cash, equipment, mine related inputs and consumables and even food provisions to miners.


As with the other arrangements, this support is exchanged for exclusive sales or a percentage share of the product or revenues generated. It is formidable that these simple interactions prove that viable financing transactions concluded within the sector by looking at what it can provide and not what it does not have.


The common barrier to formalising the ASM sector or improving its economic participation has been evaluating and basing its economic assimilation on exclusionary standards which many of such small entities cannot attain.

The ASM internal financiers have developed a criterion for risk management that is commensurate with the scale that the miners operate and have leveraged profitability on their ability to continuously increase their level of direct influence in the miner’s operations.


Hence when the miner produces more, they also get larger returns. This simple system reveals that financial access to the informal or small-scale sector requires right sized partners or partners who have a vested interest in its growth.

It is trite that the scale that the ASM sector operates is not attractive to large scale or traditional financiers, therefore it is important to build up an appropriately scaled market of financial partners that have shared interests with the ASM sector.

This step lies at the heart of making extended financial services universal and more effective in the informal sector. The informal and small-scale mining sector cannot be expected to rely on the same economic framework that was evolved to support large scale economic enterprise. The needs and expectations are fundamentally different.

The proliferation of the ASM sector shows that it is a viable economic activity. The sector can be viably nurtured for wider economic growth by creating sustainable interactions between it and the larger economic framework. Therefore, it is important to address access to wider financial products and services in the ASM sector.

The ability to access a wide range financial services in a simple and relatable format is a key catalyst for the sectors’ formalization and improved economic integration. Following the same, ASM sector host governments need to improve their focus on policies that promote and empower partners that already exist within the ASM sector to impart greater impact within the sector.

Targeting the growth of institutions or partners that already participate in the sector can result in greater impact than solely focusing on acquiring financial support from external stakeholders who do not understand the workings of the sector.

The examples of ASM sector internal financing arrangements discussed herein reflects that the sectors’ commercial potential also relies on finding partners that value dependant growth. In such a scenario, both the financier and the recipient have mutual interest in improving the scale of returns, therefore the financier also becomes an amplifier of positive influence in growing the administrative and operational capacity of the recipient.

This type of interaction and influence gradually negates the level of risk in the credibility of the recipient and enables them to access more support.

The artisanal and small-scale mining sector has shown significant resilience and ingenuity in developing its own systems and solutions to address the mobilization and distribution of capital within its value chain.

This ingenuity should be instructive to the process of developing sustainable economic policies to support the sector. It is important for governments to increase their focus on mediating the enhanced integration of the sector into the mining economy.  

In this regard, it is important to focus on creating a conducive economic environment for the sector through appropriate policies and law. Most African countries have a strong presence of the informal and small-scale mining sector and it is a sector which is growing in proportion. Following the same it is important to empower the sector to become more sustainable and competitive.