Swedfund backs TLG fund with $15 million to strengthen SMEs

Swedfund, Sweden’s development finance institution, has announced a $15 million investment in the TLG Africa Growth Impact Fund II (TLG II). This initiative aims to bolster small and medium-sized enterprises (SMEs) across Africa by providing tailored financial solutions to businesses that often face challenges accessing traditional financing.

SMEs are vital to Africa’s economic landscape, employing approximately 80% of the workforce and contributing significantly to Gross Domestic Product (GDP). However, many of these enterprises struggle to secure appropriate financing. The International Finance Corporation (IFC) estimates that the SME finance gap in sub-Saharan Africa stands at $331 billion, highlighting the pressing need for innovative financial interventions.

TLG II offers a unique approach by combining flexible, long-term debt with equity participation and guarantees from local banks. This structure enables the provision of loans with terms and interest rates conducive to the sustainable growth of viable but financially distressed SMEs. By partnering with local financial institutions, TLG II ensures that the financing solutions are tailored to the specific needs of the businesses and the local economic context.

Swedfund’s investment is part of a broader $75 million first close of TLG II, which includes contributions from Norfund, the IFC, Bpifrance, and the UK’s Foreign, Commonwealth & Development Office through its Manufacturing Africa program. This collaborative effort underscores a shared commitment to supporting African SMEs and fostering sustainable economic development across the continent.

Beyond financial assistance, TLG II provides strategic guidance to its investees through collaborations with advisory partners such as McKinsey, BDO, ESS, and Ndarama Works. This support encompasses areas like corporate finance, environmental, social, and governance (ESG) compliance, and operational improvements, ensuring that SMEs are well-equipped to navigate their growth trajectories.

Swedfund’s investment in TLG II aligns with its mission to reduce poverty through sustainable investments in developing countries. By focusing on the preservation and creation of decent jobs, particularly in sectors like manufacturing, healthcare, agriculture, and telecommunications, Swedfund aims to contribute to the broader goals of economic development and poverty alleviation in Africa.