New capital for agribusiness in Nigeria and healthcare SMEs across the continent
CDC, the UK’s development finance institution, has today announced two new impact investments that will provide credit to SME healthcare providers across Africa; and help finance small and medium sized businesses in the agriculture sector in Nigeria.
The two investments, made through the Impact Fund, are:
- A US$10 million long term loan to the Medical Credit Fund, which has been working to provide access to credit for healthcare SMEs since 2010.
- A US$15 million commitment to the Fund for Agricultural Finance in Nigeria (FAFIN), managed by Sahel Capital. FAFIN invests in high-growth enterprises across the agricultural value chain in Nigeria.
CDC’s investment in Medical Credit Fund (MCF):
The private healthcare sector in Africa delivers more than half of healthcare services but is currently chronically underfunded, with access to finance being a major barrier. Small and medium sized healthcare providers in particular find it difficult to access capital. MCF, initiated by the PharmAccess Group, aims to improve the situation by providing flexible local currency debt financing through risk-sharing partnerships with local financial institutions (FIs). Loans are typically used for renovations, medical equipment and working capital.
MCF also provides support and expertise to improve the business management and quality of services delivered by these healthcare providers, which also aims to reduce the risk of loan default.
In the last six years MCF has built a well performing SME loan book with FIs in Kenya, Tanzania, Ghana and Nigeria. In that time over 1,200 loans have been disbursed, financing over 800 different healthcare clinics and pharmacies, which in total service over 1.3 million patients per month. Of these, over 56% are low income and 75% comprise women and children. MCF has also overseen the delivery of training to nearly 2000 staff within their partner FIs.
The Impact Fund’s US$10 million investment is the largest tranche of a total of US$19m of new funding for MCF, with other incoming lenders including the IFC, Agence Fran√ßaise de D√©veloppement and private investors. CDC is providing long term debt (10 years), providing a stable funding base to support MCF’s growth.
This new, second round of funding will enable MCF to meet the demand for larger and more flexible loans, while also continuing to cater to the needs of the health SMEs it has been serving. Going forward, MCF will be able to finance not only healthcare providers but also other businesses in the healthcare sector such as suppliers of medicines and diagnostic equipment. Finally, the expansion has enabled MCF to enter into new partnerships and explore opportunities in other countries in sub-Saharan Africa.
Sara Taylor, Investment Director of the Impact Fund, said:
“Too many people across Africa are still unable to access good quality healthcare, which is why we’ve invested in MCF’s unique model which delivers impact on many levels. First MCF helps extend affordable access to people who need it, secondly it supports healthcare providers in implementing higher quality standards, and thirdly it engages with financial institutions to increase the overall level of lending to the healthcare sector.”
Arjan Poels. MCF Managing Director, said:
“CDC’s support in this new financing round will significantly catalyse our efforts to improve access to finance for the private healthcare sector in Africa, building on the strong foundation established with our existing public and private donors and investors. We look forward to accelerating our impact together.”
CDC’s investment in the Fund for Agricultural Finance in Nigeria:
Agriculture continues to play a vital role in the Nigerian economy – accounting for 60 percent of labour force and 24 percent of GDP. The great majority of farms are owned by smallholder farmers in the country relying on SMEs in the sector to connect them to the growing Nigerian consumer market.
Despite their importance, agriculture SMEs struggle to access long-term flexible finance, both in terms of size of investment and tenure. FAFIN is trying to tackle this problem by providing equity and quasi-equity investments of up to US$6.5 million.
Mezuo Nuweli of Sahel Capital said:
“Sahel Capital is passionate about impacting the lives of farmers and entrepreneurs within the agribusiness sector. We look forward to this new partnership with CDC, levering CDC’s depth of experience as we build up our engagement with agribusiness SMEs in Nigeria.”
Since FAFIN’s launch in 2014, four local high growth companies have received investment creating over 500 new jobs ‚Äê 50% of which are for women and young people ‚Äê and improved the lives of over 1,000 smallholder farmers and their families by supporting innovative business incentives and out‚Äêgrower schemes. With the additional capital raised from CDC and other investors including the AfDB, the Dutch Good Growth Fund, the Federal Government of Nigeria, KfW Development Bank and the Nigeria Sovereign Investment Authority, FAFIN aims to invest in additional companies which could create over 4,000 more direct and indirect jobs, and further transform the lives of over 36,000 smallholder farmer families across Nigeria. The fund is managed by Sahel Capital, a fund manager focused on agribusiness in Nigeria, and provides financial, capacity-building and technical assistance to its portfolio companies.