Convergence has awarded scale-up/expansion stage support under the Blended Finance Accelerator for Fund Managers (A4FM) to EG Capital to launch and scale-up the EG Economic Empowerment Fund, a USD 100 million blended finance debt fund investing in small and medium-sized enterprises (SMEs) for supply chain security and resilience across East Africa and Southern Africa.
Institutional capital remains significantly under-allocated to SME debt in Africa with financing gaps estimated to be over $331 billion. Structural constraints, including limited collateral, weak credit histories, and perceived credit risk have restricted participation from institutional investors. At the same time, traditional bank lending remains short-tenor and inflexible, leaving a gap for scalable, structured credit solutions that can meet both borrower needs and institutional investment requirements.
The EG Economic Empowerment Fund seeks to bridge this gap by deploying flexible debt instruments, tailored to SME cash flows. The fund is structured with embedded downside protection through a combination of first-loss capital and guarantees designed to improve the overall risk-return profile and enable participation from institutional investors. By aligning structuring flexibility with institutional standards, the vehicle aims to unlock capital into underserved segments in some of the least developed countries in the region.
Over time the fund aims to build a diversified portfolio of SMEs operating in sectors critical to climate adaptation, supply chain resilience, regional trade, and economic growth. By demonstrating a scalable approach to SME credit, the fund is positioned to contribute to the development of a deeper, more investable private credit market in Africa.
Design question and learning potential from the market: How can blended finance structures be used to make SME debt in frontier markets investable for institutional capital at scale?
EG Capital is addressing the structural constraints of SME lending in frontier markets by combining layered risk-sharing mechanisms with flexible financing instruments tailored to borrower cash flows. The fund integrates first-loss capital and guarantee structures to absorb early-stage losses and macroeconomic volatility, while preserving commercial return profiles for senior investors. This enables institutional investors, particularly domestic pension funds and family offices, to participate in SME credit markets that have historically been perceived as too risky. Over time, the model aims to contribute to the development of a deeper private credit ecosystem in Africa by building a track record of risk-adjusted returns and encouraging institutional participation.
The Accelerator’s support will focus on advancing the pathway to final closing, strengthening the catalytic structure, supporting deployment into the first investments, and refining FX risk management approaches. These activities aim to fast track the fund towards scale.
