Reaching small and growing businesses in frontier markets
EIFP Michele Yakice © Atchioua Photography.jpg
Small and growing businesses are the backbone of economies in frontier markets across Africa. They create jobs, strengthen local supply chains and spark innovation. Despite their critical role, these businesses face a $330 billion funding gap – this can hold back entrepreneurship and slow economic development.
Our latest report explores how locally managed SME investment funds can help close this gap, and the ways development finance institutions (DFIs) and impact investors can work with them.
The publication shares the experiences of two organisations that are tackling the funding gap in different ways.
Lessons from IPDEV’s model
Investisseurs et Partenaires (I&P) has pioneered locally rooted investment funds through its IPDEV approach. By training fund managers, enhancing governance and attracting local investors, IPDEV has enabled investments in nearly 60 African SMEs. This has helped drive revenue growth, job creation and has unlocked follow-on funding.
Insights from the Collaborative for Frontier Finance (CFF)
The Collaborative for Frontier Finance is an initiative that aims to accelerate access to finance for small and growing firms. It has been tracking small business growth funds (GFs) that are filling the “missing middle” – enterprises too large for microfinance but too small or risky for banks and private equity. With flexible financing tools and hands-on support, GFs are helping businesses grow faster than the broader economy, creating quality jobs and advancing gender equity.
These two perspectives on local investment funds provide considerations for impact investors in frontier markets and can help shape the conversation on mobilising capital into local funds to support private sector development.
This report is part of our Foundations of Growth series of publications, which shares the trends, lessons, challenges, and opportunities of investing in frontier markets in Africa. Foundations of Growth is aimed at helping development finance institutions, donors and impact investors develop their strategies for operating in these markets.