(Bloomberg) -- A Group of Seven push to spur small business lending in Africa has announced its first deal, with the UK’s British International Investment providing a $25 million facility to a bank in Sierra Leone.
The initiative, called the Africa Resilience Investment Accelerator, or ARIA, aims to unlock commercial lending for small businesses in fragile African nations. It’s part of a broader G-7 pledge to invest $80 billion in the region’s private sector by 2027.
Access to finance is a key hurdle for Africa’s small- and medium-sized enterprises, which generate an estimated 80% of all jobs on the continent, according to the African Union.
BII’s deal with the Sierra Leone unit of Ecobank Transnational Inc. aims to boost commercial lending in a nation where private sector capital accounts is less than 0.01% of the overall economy. That compares to 13% in Nigeria and 32% in Kenya, according to World Bank data. In the UK, it’s 121%.
“In Sierra Leone, the issue is particularly bad, but it’s an issue we see in a lot of markets,” Alex Kucharski, BII’s head of West Africa for ARIA, said in an interview. “Our facility enables the bank to lend more in local currency and for a longer tenor” of up to five years, he said.
Sierra Leone’s central bank raised its benchmark interest rate last week to 24.75%, its highest level in more than 13 years. Support from BII, which is owned by the UK government, won’t mean cheaper money but will boost credit availability, Kucharski said.
“Some of the issues are structural,” he said. “We’re trying to solve as many barriers as we can.”
ARIA has set up offices in Sierra Leone, Ethiopia, Benin and the Democratic Republic of Congo to build an investment pipeline.
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