The statement released last week said TDS signed an initial four year senior cum mezzanine debt facility to be managed by Grassroots Business Fund (GBF), to finance agribusiness SMEs in Kenya, Tanzania and Uganda.
The facility will focus on women or youth-led missing middle SMEs operating in the agricultural sector with solid managerial foundations and high potential for social impact. The transaction is enhanced with a partial risk guarantee from African Guarantee Fund (AGF) of 50 percent with up to 75 percent in the case of women-led SMEs.
“Rolling-out our SME Programme has enabled TDB to impact further a business segment which makes a massive contribution to the livelihoods of our peoples,” said Admassu Tadesse, TDB President and Chief Executive.
Tadesse said the Nairobi based regional bank is delighted with the signing of the blended finance transaction with GBF and AGF, “Together with which we are implementing a targeted regional approach to increase our support to SMEs, which are central to the realization of sustainable development goals in East Africa and indeed, globally.”
“Our programme is focused on exploring new innovative business models and products in the SME space,” added Gloria Mamba, TDB Coverage Executive for Southern Africa.
The facility will be blended with two technical assistance contributions from TDB and AGF totalling U$ 110,000 for the execution of mutually agreed upon co-funded investee capacity building activities. With the blend of mezzanine and senior debt, the technical assistance will be specifically focused on improving SMEs’ financial management systems.
“We are all excited about this transaction with TDB and AGF, which serves to connect local businesses with domestic and international capital, markets, and business development assistance,” said GBF’s CEO, Harold Rosen.
AGF’s acting Group CEO, Jules Ngankam said, “Our objective as we issue this loan portfolio guarantee to Grassroots Business Fund is to mitigate the deterioration of SMEs’ perceived risk. Agribusinesses in particular have been highly disrupted due to the imposed restrictions to curb the spread of COVID-19.”
In Kenya, Tanzania and Uganda, agriculture contributes respectively to approximately 30 percent of gross domestic product, while employment provides, correspondingly, between 55 and 70 percent of all jobs, and as much as 77 percent of all female jobs.
Furthermore, the SME financing gap is valued in Sub-Saharan Africa at U$331 billion for formal SMEs, including U$49 billion for women entrepreneurs. It is indeed mostly access to finance, alongside other challenges, which hinders SMEs from flourishing and even surviving.
With emerging market SMEs contributing to up 40 percent GDP and 70 percent of all employment, and both SMEs and agriculture featured high on each government’s development agenda, transactions such as this one have the potential to meaningfully impact sustainable socio-economic development of targeted countries at grassroot levels.