FSD Africa Launches Facility to Aid Financing for African Small Businesses

By Adedapo Adesanya

FSD Africa has launched the Manager Finance Facility (MFF), an initiative aimed at strengthening emerging local capital providers and expanding access to financing for small and growing businesses across Africa.

The facility is supported by FMO— the Dutch entrepreneurial development bank- and the UK Government’s Foreign, Commonwealth and Development Office (FCDO) Nigeria.

The MFF will provide catalytic, returnable capital to Alternative Local Capital Providers (ALCPs), enabling them to test innovative financing models, build investment track records, strengthen their operations and attract larger pools of capital.

According to a statement, FSD Africa said many small and growing businesses remain underserved by traditional financial institutions due to high transaction costs, collateral requirements and perceptions of risk, while emerging local capital providers face financing constraints of their own.

Ms Juliet Munro, Early-Stage Director at FSD Africa, said the initiative was designed to “finance the financiers” by helping locally rooted capital providers prove their models, strengthen their institutions and develop the track records required by investors.

“We need to finance the financiers. Across Africa, we are seeing a new generation of locally rooted capital providers developing innovative ways of financing businesses that traditional financial institutions are not reaching,” she said.

The facility will provide support through two main forms of catalytic capital: Piloting Capital and Operational Capital.

Piloting Capital will allow ALCPs to test financing models, execute early transactions and demonstrate commercial viability, while Operational Capital will support core teams, systems, governance and compliance as providers work towards financially sustainable operations.

The providers will also have access to FSD Africa’s capacity-building and peer-learning programmes covering governance, environmental, social and governance issues, impact measurement, valuation and fundraising.

The initiative will support financing approaches such as revenue-based finance, flexible equity, venture debt, blended finance and local-currency structures, which FSD Africa said could better reflect the cash-flow and growth patterns of African businesses.

Mr Andrew Shaw, Manager, Market Creation Financial Inclusion at FMO, said the facility would help locally rooted capital providers establish track records and strengthen their institutions, thereby creating a stronger pipeline of investable businesses.

On her part, Ms Temilola Akinrinade, Investment & Capital Markets Lead at FCDO Nigeria, said the UK-backed Nigeria window of the facility would strengthen local capital providers, mobilise further private investment and support Nigeria’s economic transformation.

“The UK is proud to support the Nigeria window of the Manager Finance Facility, which will strengthen locally rooted capital providers, mobilise further private investment and support Nigeria’s sustainable economic transformation. It forms part of the UK’s wider partnership with Nigeria to increase investment, create jobs and deliver mutual growth.”

Applications for the MFF opened to Nigeria-based ALCPs on September 1, while applications from other eligible African markets opened on September 17.

FSD Africa said the facility is particularly interested in emerging capital providers developing innovative investment models, including approaches incorporating climate resilience and gender-smart strategies.

The organisation said additional funding partners would be brought into the facility as it develops, with the broader objective of building a stronger ecosystem of African-led capital providers capable of attracting catalytic, private and institutional investment.