Key investors of the fund include the IFC (International Finance Corporation); Dutch impact investor, Stichting DOEN; the French development agency, Proparco; the Dutch development agency, FMO; and the African Development Bank (AfDB). The focus of the fund will be to provide access to funding and post-investment technical assistance support for SMEs, thereby stimulating wealth creation, increasing employment and fostering local entrepreneurship in the country.
Highlighting the need for such a fund is the Financial Inclusion in Africa report recently published by AfDB, which revealed that SMEs consistently rank access to finance as one of the top three constraints to their growth.
Fosters Kalaile, Country Manager of BPI Malawi, says that the fund was launched in response to this growing demand for access to finance and technical assistance, and she is confident that this fund will be able to offer local entrepreneurs and businesses exactly that.
Kalaile explains that the fund will be managed by a local investment team from a regional office in Blantyre and will replicate the South African Business Partners Limited model, which for the past 33 years has specialised in investing capital, skills and knowledge in entrepreneurs. She says that the fund will be diverse in its investment selection within the SME space and investment amounts will range from sector to sector.
“Access to finance remains an issue for many SMEs due to local financial institutions’ hesitancy to take on additional risk, and the limitation placed on businesses applying for finance due to the level of securitisation required. In response to the growing need for risk capital and quality technical assistance in Malawi, BPI has a specific mandate to operate exclusively in the SME space and to invest both capital and knowledge in the entrepreneur and business.”
According to Nazeem Martin, Managing Director of Business Partners Limited, Malawi was an attractive choice for the business to establish itself due to the fact that the country shares many similarities with the South African SME environment. “The regulatory environment is similar to South Africa, which means we can relate to the business practices and culture in the country. The Government is also driving the process of creating an enabling business environment in the country, which is positive for the sector. Government has also shown that it has an appetite to protect foreign investor rights, thereby making the country foreign investor friendly.”
He adds that the regional office will play a crucial role in offering products and services specifically tailored to meet the individual SME’s unique needs, and will play an active role in the businesses financed. “We believe that the team’s local knowledge, along with a local presence, is needed to effectively perform the due diligence on the entrepreneurs and the investments, as well as provide value to the clients invested in,” concludes Martin.