Starting with Ghana, the British International Investment (BII), the UK’s development finance institution, will use a permanent capital vehicle to drive its investments in SMEs across Africa.
A new platform, the Growth Investment Partners (GIP) Ghana, is taking off with a commitment of up to $50m from BII to provide long-term flexible capital to SMEs.
“This is a first-of-its-kind investment company,” said Chris Chijiutomi, BII’s managing director and head of Africa.“BII has created GIP as a unique and lasting solution that is not limited by the typical funding investment horizon, which will enable the company to become a true long-term partner for Ghanaian businesses to fuel their growth.
“Once GIP demonstrates its success in Ghana, we will look to roll out this platform into other African countries where there is a need for long-term flexible growth capital.”
The SME financing gap in Ghana is estimated at $4.8bn, with sectors such as agriculture and the environment significantly lagging behind due to inadequate patient capital.
Growing SMEs
There are about 2.1 million SMEs already contributing to 70% of Ghana’s GDP and analysts recommend low-interest financing with longer tenures that focus on the earning potential of businesses rather than their short-term track-records to enable SMEs to grow and thrive.
GIP is targeting at least 150 Ghanaian SMEs across different sectors to give support – in loans and equity financing of between $500,000 and $5m each over the next 15 years.
Eligible SMEs must:
- Have an annual turnover of up to $500,000 or assets of about $15m
- Have between 10 and 300 workers
- Be incorporated in Ghana and operated mainly from Ghana
Alongside the financial support from GIP, BII, which manages a $129m Ghanaian portfolio across 29 companies is providing non-financial technical assistance to the SMEs to build their capacity for scale.
“GIP will also provide non-financial support to businesses it funds. It will help the businesses institutionalise and improve corporate governance as well as environmental and social practices to grow in a sustainable way,” says GIP chair Albert Essien.
Post-investment support
“To complement this effort, BII has also established a technical assistance programme to provide technical support to SMEs to make them investment-ready as well as post-investment support,” the former Ecobank Group CEO adds.
Chijiutomi says the business will be opened up “to allow for investment from Ghanaian institutional investors to expand its capital” to guarantee sustained financing and scale GIP’s impact in the long term.
GIP’s fully-fledged operations in Accra will be managed by Ghanaian equity investment professional Jacob Kholi who believes their work will achieve a quick turnaround for shareholders while unlocking the potential of local SMEs within record time.
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