Source: "$30m for best ideas" by John Sambo for the East African Business Week
Five multilateral financial institutions have put together $30 million to lend to selective Small Medium Enterprises (SMEs) in Kenya, Rwanda and Uganda.
Business Partners International East Africa (BPI EA), will provide cash ranging from $50,000 to $1 million. The lending formula has been tested in South Africa and several other African countries including Kenya and Rwanda proving to be an effective way strengthen the SME sector. Business Partners International is a specialised risk capital financier which focuses on funding SMEs that have viable businesses.
However this is the first specific fund for three East African countries together.
Mark Paper, the chief operating officer said last week, "BPI EA will initially focus on investments in East Africa, namely Kenya, Rwanda and Uganda, but we foresee that in the short-to-medium term we will include other countries, and will aim to make this new vehicle the way in which all investments are concluded in Africa."
The International Finance Corporation (IFC), the World Bank Group private lending arm, is leading a consortium composed of four other lenders.
These are the Swiss Investment Fund for Emerging Markets (SIFEM); Dutch impact investor Stichting DOEN and the Dutch Development Agency (FMO). The Canada-based Mennonite Economic Development Associates (MEDA).
Each put up $6 million and has a 20% stake in Business Partners International East Africa.
BPI EA wants to reach out to those enterprise owners whose business is doing well but cannot attract commercial bank attention or small family-owned companies.
Paper said, "Private equity firms often refrain from lending to these SMEs as they either too small, or prefer not to deal with the complexities of doing business with a family management team rather than a board of members. This is however the area that Business Partners Limited specialises in, and exactly the service offering we are working to expand across Africa."
According to a statement, BPI EA aims to encourage entrepreneurship, facilitate job creation and contribute to small enterprise development by providing access to risk capital funding, technical assistance and mentorship to SMEs in East Africa.
"A large number of family owned SMEs are caught between informal sources of capital and commercial lending tools such as banks and private equity," he said.
BPI was established in 2004 as a subsidiary of Business Partners Limited, to apply the investment model refined in South Africa to other African countries. Funds have been established in Kenya, Malawi, Namibia, Rwanda, and Zambia.
The management of the Funds is organised to implement the principles that Business Partners has developed to manage investments in SMEs in Africa over the last 30 years.
BPI manages the Funds and Technical Assistance Facilities through its wholly-owned fund manager subsidiaries in Kenya, Malawi, Namibia, Rwanda, and Zambia.
Along with Business Partners' innovative risk financing instruments and value-add advisory services, Business Partners has developed a delivery model unique from that of traditional private equity funds to serve this segment of family SMEs in selected African countries.
According to a statement, BPI has established and managed various SME funds in Madagascar, Kenya and Rwanda since it established its presence in Africa in 2004. It raised a similar $30 million fund for Southern Africa in April of last year, which has so far approved 20 investments to the value of $6.67 million in SMEs in the region.