As part of its mandate to strengthen the entrepreneurial fabric of the region, the Eastern and Southern African Trade and Development Bank (TDB) SME Programme is pleased to announce the signing of an initial 4-year senior/ mezzanine debt facility of USD 1 million to be managed by Grassroots Business Fund (GBF), to finance agribusiness SMEs in Kenya, Tanzania and Uganda. The facility will focus on women or youth-led missing middle SMEs operating in the agricultural sector with solid managerial foundations and high potential for social impact.
The transaction is enhanced with a
partial risk guarantee from the African Guarantee Fund (AGF) of 50% with up to
75% in the case of women-led SMEs. The facility will be blended with two technical assistance contributions
from TDB and AGF totalling USD 110,000 for the execution of mutually agreed
upon co-funded investee capacity building activities. With the blend of mezzanine and senior debt, the technical
assistance will be specifically focused on improving SMEs’ financial management
The TDB SME Programme finances
agribusiness through the provision of working capital, funding for expansion
and support for value addition. Missing middle SMEs are typically unable to
access medium to long term patient capital from conventional borrowing – a
challenge which is overcome through this transaction’s structure.
Business Fund (GBF) is a global impact organization that utilizes the power of
blended capital to invest in traditionally under-financed businesses. More
specifically, GBF extends structured mezzanine finance, senior debt, and
business advisory services to viable, sustainable and inclusive businesses, which
provide sustainable economic opportunities to millions of people at the base of
the economic pyramid. GBF has over a decade’s experience investing all across
Africa through its regional office based in Nairobi.
The African Guarantee
Fund for Small and Medium-sized Enterprises (AGF) is a non-banking financial
institution that contributes to the promotion of economic development in Africa
through the provision of partial guarantees and capacity development to
financial institutions, in view of facilitating access to finance for SMEs.
This facility builds on various partnership agreements and
transactions which have been signed since the launch of TDB’s SME Programme in
2018, and is the first of its kind with its focus on mezzanine finance. The SME
Programme’s approach consists in leveraging TDB’s seed capital, blending it,
and directing it through partner financial institutions, such as GBF, who
target SMEs – from micro enterprises to missing middle SMEs – as their
In Kenya, Tanzania and Uganda, agriculture contributes
respectively to approximately 30% of GDP, while employment provides,
correspondingly, between 55 and 70% of all jobs, and as much as 77% of all female
jobs. Furthermore, the SME financing gap is valued in Sub-Saharan Africa at USD
331 billion for formal SMEs, including USD 49 billion for women entrepreneurs.
It is indeed mostly access to finance, alongside other challenges, which
hinders SMEs from flourishing and even surviving.
With emerging market SMEs contributing to up 40% GDP and 70%
of all employment, and both SMEs and agriculture featured high on each
government’s development agenda, transactions such as this one have the
potential to meaningfully impact sustainable socio-economic development of targeted
countries at grassroot levels.
SME Programme has enabled TDB to impact further a business segment which makes
a massive contribution to the livelihoods of our peoples” says Admassu Tadesse,
TDB President and Chief Executive. “We are therefore delighted with the signing
of this blended finance transaction with GBF and AGF, together with which we are
implementing a targeted regional approach to increase our support to SMEs, which
are central to the realization of sustainable development goals in East Africa
and indeed, globally.”
“Our programme is focused on exploring new innovative
business models and products in the SME space” adds Gloria Mamba, TDB Coverage
Executive for Southern Africa.
“GBF is a leader in supporting agribusinesses, which form the
backbone of the economy in our region and AGF is committed to facilitating
access to finance for SME’s. This transaction allows us the opportunity to
extend mezzanine debt to agribusinesses who often struggle to find the
appropriate finance to fund their growth.”
“We are all excited about this transaction with TDB and AGF, which
serves to connect local businesses with domestic and international capital,
markets, and business development assistance. In so doing, it highlights
business-linked models that can lift large numbers out of poverty, while also
building support for a peaceful, equitable and market-based system” says Harold
Rosen, GBF Chief Executive Officer.
AGF’s Acting Group CEO Jules Ngankam said “Our objective as we issue this loan portfolio guarantee to Grassroots Business Fund is to mitigate the deterioration of SMEs’ perceived risk. Agribusinesses in particular have been highly disrupted due to the imposed restrictions to curb the spread of COVID-19. AGF is pleased to be part of this partnership that will strengthen and rebuild the East African SME community, which is the region’s growth engine.”
is timely. It comes in a period marked by disrupted supply chains, higher
perceived risks and constrained availability of liquidity – all brought about
by the Covid-19 crisis. In response, TDB and its partners have together added quivers
to their bows to continue driving triple bottom-line impact into the region.