KEY POINTS
• FSD Africa has launched the Manager Finance Facility in Lagos and Nairobi.
• The facility will provide flexible capital to emerging local providers of alternative business finance.
• Applications opened for Nigeria based providers on Sept. 1 and for other eligible African markets on Sept. 17.
MAIN STORY
Financial Sector Deepening Africa has launched a new financing facility aimed at helping locally rooted capital providers expand the flow of finance to small and growing businesses across Africa.
The Manager Finance Facility was inaugurated in Lagos and Nairobi with support from FMO, the Dutch entrepreneurial development bank, and the UK Government’s Foreign, Commonwealth and Development Office in Nigeria.
The initiative targets Alternative Local Capital Providers, which FSD Africa said were developing new financing models for businesses that traditional financial institutions often do not reach.
Juliet Munro, FSD Africa’s Early Stage Director, said these providers also faced funding constraints that could prevent promising financing models from moving beyond the early stages.
“The MFF is designed to bridge this gap – helping promising providers move from experimentation towards scale, channelling more and more appropriate capital to African businesses in the longer-term.”
The facility will offer two forms of catalytic capital. Piloting Capital will allow providers to test new financing models, complete early transactions and demonstrate whether their approaches can work commercially.
Operational Capital, meanwhile, will provide working capital for areas such as teams, systems, governance and compliance as providers seek investment capital and work towards financially sustainable operations.
Munro said beneficiaries would also receive access to capacity building and peer learning covering governance, environmental, social and governance practices, impact measurement, valuation and fundraising.
Andrew Shaw, Manager, Market Creation Financial Inclusion at FMO, said small and growing businesses needed financing that reflected the way they operated and expanded.
He said supporting locally rooted capital providers could help them build institutional capacity and track records needed to attract larger sources of investment.
Temilola Akinrinade, FCDO Nigeria Investment and Capital Markets Lead, said the initiative would support financing solutions for Nigerian entrepreneurs and growing businesses.
She said the UK was supporting the Nigeria window of the facility as part of its broader partnership with the country to increase investment and create jobs.
THE ISSUES
- The facility is aimed at a gap in business financing where emerging local capital providers have developed alternative ways to fund businesses but may lack the capital and institutional capacity needed to expand those models.
- Unlike conventional grants, the MFF is structured around flexible, returnable capital. This means the support is intended to help providers test financing models, execute transactions and build commercial records that can support subsequent fundraising.
- The facility addresses both financing and institutional capacity. While Piloting Capital focuses on testing and demonstrating financing models, Operational Capital is intended to strengthen the internal systems and structures required for sustainable operations.
- For small and growing businesses, stronger local capital providers could create additional financing channels, particularly where conventional financial institutions do not adequately match the way such businesses operate or grow.
WHAT’S BEING SAID
“The MFF is designed to bridge this gap – helping promising providers move from experimentation towards scale, channelling more and more appropriate capital to African businesses in the longer-term.” – Juliet Munro, Early Stage Director, FSD Africa
“This is how we can build a stronger pipeline of investable businesses and mobilise more private and institutional capital into underserved African markets.” – Andrew Shaw, Manager, Market Creation Financial Inclusion, FMO
“It forms part of the UK’s wider partnership with Nigeria to increase investment, create jobs and deliver mutual growth.” – Temilola Akinrinade, FCDO Nigeria Investment and Capital Markets Lead
WHAT’S NEXT
Applications for the MFF opened to Nigeria based Alternative Local Capital Providers on Sept. 1, while applications from other eligible African markets opened on Sept. 17.
Applicants will undergo assessment covering their financing models, proposed use of the facility, institutional requirements, risk and due diligence before approval, contracting and disbursement.
BOTTOM LINE
The MFF is designed to strengthen local providers of alternative business finance so they can test, develop and scale financing models for underserved African businesses. FSD Africa, FMO and FCDO Nigeria are supporting the initiative as a route to mobilising more capital into small and growing businesses.
