Launching two innovative pilot facilities for African fund managers
Small Foundation is launching two new facilities in 2025 to provide critical working capital to African fund managers: a US$2.5 million facility supporting micro funds in underserved markets, and a partnership with a pan-African investment platform for macro funds.
Small and medium-sized enterprises (SMEs) are the engine of Africa’s local economies: creating jobs, enabling innovation, and meeting critical needs. Nevertheless, many African SMEs struggle to thrive, largely due to lack of access to capital. Today, they face a significant annual funding gap of US$330 billion.
To address this challenge effectively, capital must be directed by those best positioned to understand and respond to local market needs – local funds and capital providers. Yet local fund managers face financial hurdles to sustain operations and capitalise on investment opportunities.
At Small Foundation, we have spent years in the ecosystem for local fund management, learning from investments in partners such as AgDevCo, Acumen, Capria and I&P. Our local fund manager strategy focuses on three key pillars:
- Strengthening local fund managers to launch and scale
- Field building to share knowledge among fund managers, investors and other stakeholders
- Investing in a diverse range of investment vehicles to support rural SMEs with the appropriate debt, equity and enterprise support throughout their lifecycle
Strengthening local fund managers
Emerging fund managers in sub-Saharan Africa typically take three years to reach their first close. During this period managers must cover operational costs, attract investors, and build a track record – often with limited resources. This challenge is especially acute outside of major hubs like Nigeria, Kenya, and South Africa, where funding ecosystems are less developed.
To address this, we are launching two pilot facilities in 2025 to provide fund managers with financial runway during the lengthy fundraising process, reach first close, and begin deploying capital to SMEs in underserved markets. Each facility will support fund managers operating at different scales:
- US$2.5 million General Partner (GP) Working Capital Facility – Offering long-term debt (7–9 years) and quasi-equity funding to local fund managers raising micro funds (AUM under US$20 million) and operating in underserved markets. Priority will be given to emerging managers who are breaking new ground with innovative fund models that attract local capital; strategies for rural impact; or a focus on mobilising capital in overlooked regions.
- Partnering with a pan-African multi-strategy investment platform – This facility will support larger funds (AUM above US$20M) with working capital for pre-close and set-up expenses.
Small Foundation has also supported Advancing Women in Investing (AWI) to design a warehousing facility for first-time fund managers, and will continue to explore similar innovative solutions.
Field building to share knowledge
To build a stronger investment ecosystem, we are:
- Continuing our partnerships with a range of impact networks such as Women in African Investments (WAI) where fund managers can connect and share lessons; and the Collaborative for Frontier Finance to support its Early Stage Capital Providers network.
- Supporting and participating in the Catalytic Capital Consortium (C3), a multi-funder initiative with a global community of practice that enables catalytic investors to share deal flow and exchange lessons about effective fund manager support. Contributing to the FASA Learning Agenda in partnership with USAID and Norad, building a data analytics lab to help fund managers and investors better understand the costs, risks, and returns associated with SME-focused funds, leading to smarter resource allocation
- Supporting and participating in the Growth Firms Alliance, an alliance of philanthropic funders dedicated to unleashing the potential of growth firms to transform low- and middle-income countries. GFA members are committed to increasing the quality and quantity of aggregator financing platforms serving growth firms.
Small Foundation will continue to find ways to support research and impact networks that drive transparency and data sharing for investors and fund managers.
Investing in a diverse range of investment vehicles
Rural SMEs have diverse financing needs which require innovative mechanisms deployed at different stages of growth. Our investments in early stage ag-techs through 54 Collective and Emerald Africa Financing Facility have provided valuable insights on:
- The importance of flexible capital structures
- The role of technical assistance in supporting early-stage businesses
- The potential for technology to transform rural enterprises
Small Foundation will continue to invest strategically in funds that demonstrate innovative approaches to local capital mobilisation and focus on underserved market segments. We are particularly interested in fund managers who combine multiple financing instruments, leverage local networks and knowledge, and demonstrate a deep understanding of rural market dynamics.
Our goal is to prove that supporting local fund managers isn’t just impactful; it’s commercially viable. When fund managers have the resources and support they need, they can unlock capital for underserved markets, drive meaningful change, and create a ripple effect of economic opportunity.
Building a resilient, inclusive investment ecosystem in Africa is a collective effort.
- Fund managers: If you are raising a fund and need working capital support, we want to hear from you – especially if you focus on underserved markets or developing innovative rural investment strategies.
- Ecosystem partners: We are seeking co-investors and implementation partners to scale these initiatives. Whether you’re interested in sharing deal flow, contributing to the learning agenda, or exploring co-investment opportunities, your involvement can make a difference.
