Small loans are a lifeline for entrepreneurs, especially in Muslim countries that abide by Islamic financing principles, which eschew interest charges in favor of profit and loss sharing and frown upon excessive risk. Taysir Finance SA, a two-year old Islamic microfinance institution in Senegal—the predominantly Muslim nation’s first such institution—secured 5 billion CFA francs ($8.2 million) to lend to local small and midsize enterprises.
Sovereign Fund for Strategic Investments, known as Fonsis, a Senegal state-owned strategic investment firm, made the loan to Taysir via its $33 million Islamic Recovery Fund created.to help small businesses after the COVID pandemic.
The loan demonstrates the Senegalese sovereign fund’s “commitment to co-developing innovative financing solutions tailored to the private sector’s needs in collaboration with banks and decentralized financial systems,” said Babacar Gning of Fonsis.
Separately, French development financial institution Proparco lent €2 million ($2.1 million) to Microfinance Solidaire, or MFS, an initiative of French NGO Entrepreneurs du Monde that provides financial support to social enterprises and microfinance institutions across fragile economies in sub-Saharan Africa, Southeast Asia and Haiti.
Catalytic microfinance
Microfinance institutions fill a gap left by traditional banks and lenders, a gulf particularly acute in countries with Sharia financing laws. The institutions have helped boost financial inclusion in Senegal—where roughly 300,000 smaller enterprises, most in fishing and agriculture, account for 90% of all businesses—to more than one in two adults over the past decade.
MFS’s new credit line from Proparco marks its third from the French DFI since 2021. MFS will use much of the loan to support women, who make up 88% of its funding recipients, and agricultural ventures, which account for 37% of its loans.
Proparco’s Emmanuelle Riedel-Drouin said that MFS “undeniably contributes to reducing inequalities, by supporting microfinance institutions and social enterprises providing access to energy, and by supporting the financing of the agricultural sector, against a backdrop of weakening food security in Africa.”
