Role of catalytic finance in sub-Saharan Africa

Sub-Saharan Africa, a region with immense potential, faces unprecedented challenges, including worsening fragility, geopolitical realignments, climate crises and persistent conflicts. Yet, beneath this bleak picture lies a region brimming with opportunity and resilience.

Africa’s young, rapidly growing population, expected to hit 2.5 billion by 2050, represents a future workforce and consumer base for the world. Meanwhile, its natural resources fuel the global transition to green energy.

This strategic relevance has drawn significant international interest including regional blocs and private entities. This influx of external attention brings opportunities for infrastructure growth and economic development but also comes with risks—the competition often prioritises geopolitical gains over long-term sustainability, undermining local ownership and leaving states vulnerable to exploitation.

One promising pathway is catalytic finance—investments designed to derisk markets and attract private capital. This model has already proven its potential in rebuilding fragile economies and unlocking growth. Through the Finance for Inclusive Growth in Somalia programme, an AECF initiative, microfinance institutions are revitalising and expanding the local economy, focusing on livelihood enhancement, job creation and inclusive growth for women, youth, and producer groups.

Catalytic finance

In the renewable energy sector, catalytic finance continuously plays a transformative role. Targeted investments in off-grid solar have brought power to over 100 million people in the past decade. Agribusiness is another sector where catalytic finance has unlocked growth, driving innovation, enhancing food security, and creating millions of jobs globally. In Africa, the sector employs over 60 per of the region’s labour force. Catalytic funding mechanisms, including blended finance, have been pivotal in mobilising private investments in agribusiness.

The future of Africa rests in the hands of its women and youth. Women account for 70 per cent of Africa’s agricultural labour and 40 per cent of its entrepreneurs, yet they receive just 2 per cent of venture capital funding. Africa’s youth, representing 60 per cent of the continent’s population, face an unemployment rate exceeding 35 per cent in some countries. Targeted investments can change these dynamics.

So, what works in the face of fragility? The evidence points to tailored, context-specific solutions. In Somalia, Sharia-compliant financial models have expanded credit to women and youth entrepreneurs. In Burkina Faso, solar-powered irrigation systems financed through public-private partnerships are boosting agriculture and building climate resilience.

Catalytic finance, when deployed in promising sectors, can provide the spark needed to unlock their potential and drive sustainable growth. Women and youth, if given the tools to thrive, can become engines of resilience.

Ms Sabula is the CEO of AECF. @VictoriaSabula