A Group of Seven initiative to promote small business lending in Africa has launched its first deal, with the UK’s British International Investment (BII) providing a $25 million facility to a bank in Sierra Leone. The program, called the Africa Resilience Investment Accelerator (ARIA), seeks to expand commercial lending to small businesses in fragile African economies. This effort is part of the broader G-7 commitment to invest $80 billion in Africa’s private sector by 2027.
Small- and medium-sized enterprises (SMEs) are critical to Africa’s economy, accounting for 80% of jobs on the continent, according to the African Union. However, access to financing remains a significant challenge. In Sierra Leone, private sector capital makes up less than 0.01% of the overall economy, compared to 13% in Nigeria and 32% in Kenya.
The BII’s partnership with Ecobank Sierra Leone is designed to increase commercial lending in the country by enabling the bank to offer more local currency loans for up to five years. This is crucial in a market where the central bank recently raised its benchmark interest rate to 24.75%, the highest in over 13 years.
“We’re trying to solve as many barriers as we can,” said Alex Kucharski, BII’s head of West Africa for ARIA, noting that while the initiative won’t lower borrowing costs, it will increase credit availability.
ARIA has also established offices in Sierra Leone, Ethiopia, Benin, and the Democratic Republic of Congo to build a pipeline of investment opportunities.
