Swedfund, Sweden’s development finance institution, recently announced a $15 million investment in TLG Capital’s Africa Growth Impact Fund II (AGIF II) to support small and medium-sized enterprises (SMEs) across Africa. This investment is part of a $75 million first close for the fund, with contributions also coming from the International Finance Corporation (IFC), Norfund, and Bpifrance.
AGIF II is focused on providing flexible, long-term debt financing to viable SMEs facing temporary financial distress. The fund collaborates with local banks to offer loans with customized terms and interest rates that support the recovery and sustainable growth of these businesses.
Jakob Larsson, Senior Investment Manager at Swedfund, emphasized the importance of SMEs in Africa’s economy, highlighting that they employ 80% of the workforce and create nine out of ten new jobs on the continent. Larsson stated, “Protecting existing jobs and creating new ones is essential for poverty reduction. For African SMEs to thrive, it is vital to have a functional market with tailored financial services that address the unique local challenges they face.”
The Fund’s innovative structure combines debt financing, equity participation, and guarantees from local banks to provide SMEs access to capital that traditional banking systems often cannot provide. This model aids in business recovery and job preservation and creation, particularly in key sectors such as manufacturing, healthcare, agriculture, and telecommunications.
One of the potential beneficiaries identified by the Fund is Terra Aqua, an aluminium recycling company in Nigeria, set to receive $7.5 million in debt financing, contingent on meeting environmental, social, and governance (ESG) criteria. This investment is expected to create 200 direct and 752 indirect jobs, showcasing the Fund’s positive impact on local economies.
AGIF II builds on the success of its predecessor, Africa Growth Impact Fund I, with a goal of reaching a total fund size of $200 million. By focusing on SMEs, the Fund aims to address the financing gap faced by many small businesses, promoting inclusive economic growth across Africa.
This investment by Swedfund in AGIF II underscores the commitment to supporting African SMEs and fostering sustainable economic development on the continent.
