When we think about the impact that private credit and other forms of financing have on African companies, we tend to think about things like business growth and success. But the impact that private capital in particular has goes far beyond that. Utilized properly, it can have an incredibly powerful and positive effect on the lives and livelihoods of ordinary Africans. 

That’s true not only when it comes to things like job creation. Private credit in the right sectors can make it that much easier for Africans to get to their jobs, seek out healthcare, and to have permanent, affordable energy, and many other things.

That’s especially true in cases where the private credit provider has a social impact remit and is aligned with things like the United Nations’ Sustainable Development Goals (SDGs). 

The power of private credit in the African context 

Before taking a deeper look at how big a positive impact private credit can have on African lives and livelihoods, it’s worth understanding what exactly it is and why it’s so powerful in the African context. 

In essence, private credit involves non-bank lenders providing loans to companies. While these companies vary in size, they’re typically focused on small and medium-sized businesses or those that aren’t suited to equity investment. 

That’s particularly important in the African context, where there’s much less equity-style investment available in certain sectors and where that kind of investment isn’t always suitable to a company’s needs. In terms of available investment, the tech startup space provides a useful benchmark. Despite African startups achieving USD2.1bn in VC funding in H1 2023, that’s still a fraction of the USD 85.6bn in H1 2023 raised by US startups over the same period (which was 46% down on the previous year). 

It’s also true that some companies aren’t suited to the kind of accelerated returns that equity-style investors look for.

Private credit providers, by contrast, are able to take a more long-term approach, meaning that the companies who receive the credit are able to grow at a more sustainable pace. 

Improved impact through collaboration  

That, in turn, means that they have more time to have a tangible impact. We’ve seen this first-hand with our own portfolio companies. With just over USD235 million in assets under management (USD56.5 million was spread across 13 companies in 2022.), we’ve helped those companies touch the lives of tens of millions of people.

In fact, by the end of 2021, 35.5 million lives had been positively impacted, which is just over a third of the 100 million people we hope to impact by 2030.

Our partner portfolio companies also supported 15 142 jobs in 2022, with 43% of these held by women and 20% by the youth.
We’re not the only ones having that kind of impact either. Take TLG Capital, for example.

Its Africa Growth Impact Fund (AGIF) provides open-ended credit fund investing in sub-Saharan Africa with superior risk-adjusted returns and a multifaceted high social impact. In line with this, the Funds aims to meaningfully contribute to women’s economic empowerment and influence.

As a result of its efforts, TLG AGIF now fulfills the 2x Challenge Criteria 5 – Investment through Financial Intermediaries.

In healthcare, one of the companies has distributed over 284 million EU-compliant medications since 2020 across some of Africa’s poorest countries, another has manufactured medication for over 1,000,000 Ugandans currently receiving HIV treatment.

But we also recognise that impact can be strengthened through collaboration. That’s why we inked a partnership deal with TLG Capital in December 2022.

The partnership allows both of our companies to enhance the impact our various portfolio companies have, thanks to strengthened sharing, presenting, and co-investing in well-structured credit investment opportunities. 

It’s a collaboration that is already proving its benefit and is something we hope to see happening more frequently across the continent. 

Driving sustainable development 

Ultimately, it’s important to remember that Africa has so many of the right ingredients to become a global economic superpower. It has a young, increasingly well-connected population with high proportions of entrepreneurs. But it also has a unique opportunity to take a sustainable development path as it heads towards that pinnacle. 

One of the most powerful tools available when it comes to the continent reaching that point is private credit. When an organisation provides that credit with a social impact remit, it can help companies grow at a natural pace and in a way that allows them to maximise their own impact. 

But if we want private credit to play the role it has the potential to, then it’s imperative that players in the sector foster a sense of collaboration and work together to provide the most positive possible impact on the lives and livelihoods of ordinary Africans. 

It has been shown that mobile money and other non-traditional forms of financial services are key enablers for financial inclusion in Africa – they have disrupted traditional financial services by providing better ways to transfer funds than using cash.

With mobile and other digital payment systems, customers in Sub-Saharan Africa are gaining access to business loans, savings, and other services that a traditional bank would otherwise provide.

The greater availability of financial services has an incredible impact on many aspects of life in Africa and plays a role in alleviating poverty for communities. 

One player in the omnichannel payment field helping to make the sort of impact that the continent needs is MFS Africa.

It is the largest hub for omnichannel payments in Africa, which connects over 400 million mobile money users on the continent.

Impacting largely the unbanked and the underbanked demographic on the continent, MFS Africa connects mobile network operators, money transfer organisations, cross-border payments remittance firms, financial service providers, and worldwide merchants to millions of mobile wallets on the continent. 

“Our services focus on creating more possibilities for Africans needing to make payments, to carry out money transfers, and to remit funds to others,” explains Dare Okoudjou, Founder and CEO of MFS Africa. “Merchants, banks, mobile operators, and mobile money transfer firms have come to rely on our compliant and cost-effective service, and this is why the MFS Africa network has grown so extensively across the continent of Africa.” 

MFS Africa has achieved a significant presence in Sub-Saharan Africa, being connected today to over 60% of all mobile money wallets in the region. Understanding the need for connecting mobile money to the rest of the world, MFS Africa recently broadened its bank and fintech base offering through the acquisition of US fintech GTP.

This will enable the company to tokenize mobile money space and connect to traditional card scheme ecosystems such VISA and Mastercard.

Okoudjou explains that, “Our guiding principle is that African consumers and businesses should be able to pay for anything, both offline and online. We’ve always known that in order to really eliminate borders, we needed to connect mobile money to the rest of the world; card networks seem to be the most effective means to do so.”

The firm works in over 35 countries in Africa but believes that there are still more areas that it can provide its services to.

It is against this background that MFS Africa negotiated a deal for additional funding from Norsad Capital, an impact investor offering tailor-made debt solutions to mid-market growth companies in Sub-Saharan Africa.

Kenny Nwosu, CEO at Norsad Capital, says: “The Norsad Capital term facility will assist MFS Africa to break into Nigeria, a market that is key to MFS Africa’s growth strategy. With its extensive population and capacity to do business, Nigeria accounts for the largest movement of money around the continent, and our funding is important as it comes at a point in the company’s development where it is poised for significant growth.”

According to Nwosu, “This is a very attractive investment for Norsad as MFS Africa has a strong market position, and this market share puts MFS Africa in a position to be at the forefront of financial inclusion and digital payments in Africa.”

There is also great synergy between the two service providers since MFS Africa is aligned with Norsad’s Purpose of Building a Better Africa. As Okoudjou of MFS Africa explains: “MFS aims to decrease the cost of money remittances to Africa. We currently connect mobile money systems to one another and to money transfer organisations, banks, and other financial institutions, enabling money remittances to and from mobile money accounts. Our move into the Nigerian market will allow us to extend our footprint extensively on the African continent, bringing much-needed financial services to thousands more people.”

In line with Norsad impact objectives, MFS Africa is aligned to Norsad’s Purpose of Building a better Africa. Mobile money has disrupted traditional financial services by providing a better way to transfer funds instead of cash. With mobile payments, customers in Sub-Saharan Africa are gaining access to business loans, savings, and other services as they would get in a bank. Mobile money has an incredible impact on many aspects of life in Africa and plays a role in alleviating poverty for communities.