How Does Grant Funding Aid In Unlocking Capital Flows For SMEs In Sub-Saharan Africa?

Small and Medium Enterprises (SMEs) contribute immensely towards employment creation and driving growth of markets in sub-Saharan Africa (SSA). These businesses face a myriad of challenges that hinder their growth, the key among these being access to finance.

There is a perceived risk of lending to SMEs in SSA driven by the lack of certainty on the sustainability of investment, weak policies, institutions and regulatory frameworks and the technical capacity gaps. As a result, capital flows from the private sector in emerging markets are characterized by high borrowing costs and stringent collateral requirements.

Grant funding is patient capital which when directed to SMEs in the SSA region allows for evidence of sustainability. This acts to de-risk SMEs and lays the foundation for other funding instruments such as loans and equity, increasing private finance flows to SMEs.

The Mastercard Foundation Fund for Resilience and Prosperity, through the Challenge Fund intervention, will offer direct financial support to address the resource flow barriers faced by SMEs looking to scale up and, in turn, create and sustain employment opportunities for young people.

The Fund aims to support enterprises with moderate to high growth potential with grants ranging from US$ 500,000 to US$ 2,500,000, which will be disbursed over 3 years, based on applicants’ development stage, scalability, and business model by agreed periodic milestone targets.

The funding structure will be determined on a case-by-case basis after evaluating proposals and organizations. Additional support to successful applicants will include tailored technical assistance in alignment with FRP objectives over the 3 years.

The Fund is focusing on SMEs that are implementing their solutions in 3 key sectors: agriculture, climate impact and digital economy. The Agribusiness Challenge Fund is currently open for submission of applications from 18 March 2024 to 22 November 2024. The challenge fund is a rolling call for proposals, open for nine months with periodic harvests or collections of applications to be assessed every 12 weeks.

The Fund will soon be launching the Climate Impact Challenge Fund which will also be a rolling call for proposals open for nine months for SMEs in this sector. Thereafter the Digital Economy Challenge Fund will be launched.

Eligible SMEs that have innovative and scalable business models with significant potential to create jobs are highly encouraged to visit the Fund website and apply to the sector-specific rolling call for proposals.

The Fund is excited to sponsor and participate again at AFSIC whose focus is promoting Africa’s leading business, trade, and investment opportunities.

AFSIC 2024 presents an excellent platform to create awareness about the Fund among a diverse set of stakeholders ranging from target businesses, technical assistance providers, financial institutions, among other players that are in line with the various Fund interventions.

The Fund looks forward to exhibiting, taking part in various panels and meeting the investors sessions where we will share information about the Mastercard Foundation Fund for Resilience and Prosperity, and gain valuable insights from other speakers and delegates.