CDC Group backs Africa’s banks to ratchet up small business finance

ImpactAlpha Editor

Jessica Pothering

ImpactAlpha, February 4 – CDC Group, the U.K. development finance institution, has promised to spur global development by taking a more catalytic approach from its often risk-adverse DFI peers (see, An investor’s journey: How CDC Group is innovating with catalytic capital). In Africa, the latest demonstration of its Catalytic Strategies amounts to $275 million in commitments to African banks.

CDC is providing $100 million each to South African bank ABSA and Egyptian bank CIB, and $75 million to Pan-African bank TDB. The funding is meant to encourage the banks to extend more financing to the continent’s small businesses, which the CDC calls “the bedrock of any healthy economy.” 

For most small businesses, traditional bank financing may be more suitable than venture capital, which is usually reserved for high-growth enterprises. Emerging markets small businesses are often unable to attain bank financing because of banks’ perception of risk or intensive due diligence requirements.

Last year, CDC committed $100 million to a small business lending facility with Standard Chartered Bank Zimbabwe to support the country’s small businesses.

CDC’s latest wave of funding also includes more than $100 million to private equity and venture funds also supporting Africa’s small and growing businesses. It is investing $20 million each in Mediterrania Capital Partners, Adiwale Partners and Verod Capital Management.