GroFin, an SME development financier, has launched the GroFin Small and Growing Businesses (SGB) Fund that aims to catalyze sustainable job creation through supporting small and growing businesses in Africa.

Guido Boysen, CIO at GroFin, said: “In most African countries the small and growing businesses (SGB) sector is a major contributor to inclusive economic growth and job creation. However, entrepreneurs in Africa are grossly under-served, with 50-90% of SGBs failing within the first five years.”

“As a result, many African countries are missing out on a major engine for sustainable job creation that can help tackle poverty and improve livelihoods. Start-ups and small businesses often struggle to access the capital they need to expand. Their limited track record, fluctuating cash flows, low levels of collateral and capacity limitations makes it difficult to meet the lending criteria of most banks,” he told Africa Global Funds.

“The GroFin SGB Fund seeks to address these market barriers by providing African entrepreneurs with an integrated solution of patient growth finance, tailored business support, and access to markets,” he added.

The Fund was created by GroFin in partnership with Shell Foundation, the German development bank KfW, the Norwegian Investment Fund for Developing Countries, Norfund, and the Dutch government through the Dutch Good Growth Fund (DGGF).

The Fund, which has initial commitments of $100m, will target SGBs in Ghana, Nigeria, Uganda, Zambia, Kenya, South Africa, Rwanda, Tanzania, and Egypt.

Over the next two years, with grant funding from the German government through KfW, GroFin plans to expand the Fund’s support to SGBs to three more African countries.

“A number of countries are currently under review, and subject to proper due diligence. No decisions have been made yet,” said Boysen.

The Fund is expected to grow to $150m in two years, making it one of the largest funds specifically targeting small and growing businesses.

“The Fund’s tiered capital structure enables a range of social and commercial investors to join the Fund post its launch,” he said.

The Fund focuses on SGBs that are grossly under-served by other funds or financiers.

“Based on the viability of an entrepreneur’s business and growth plans, and not the availability of collateral, entrepreneurs will be able to access loans ranging from $100k to $1.5m for a period between two and six years,” added Boysen.

The aim is to make 80 – 100 investments per year at an average deal size of $350k.

The GroFin SGB Fund’s key focus is investing in high-impact sectors such as healthcare, education, agro-processing and energy in addition to other sectors that support inclusive growth.

The Fund is a high-impact African investment opportunity that creates both positive impact and a financial return from an under-served SME market segment.

Over 10 years the growing SGB portfolio will sustain 47,000 employees as part of its impact.

Boysen said that the Fund has Business Support Facilities where business owners can obtain advice from GroFin’s local and international SGB experts.

“Through pre-investment business support, GroFin’s team of locally-based investment managers will help entrepreneurs develop viable business plans, identify and mitigate potential risk and execute effective growth strategies. For those who qualify for investment, the business support services continue for the entire duration of the investment,” he said.

Established in South Africa in 2004, GroFin has grown from the RAPS group of companies that have invested in small and growing businesses (SGB) since 1999.

GroFin manages eight funds and programs on behalf of more than 30 international development finance institutions, development organizations, foundations, large companies and private funders with committed funding of more than $500m.