The Belgian Investment Company for Developing Countries, BIO, will provide long-term loans to banks and other financial institutions for onward lending to small and medium-sized enterprises.
The development finance institution will also partner with private equity funds that provide capital to start-ups in the form of equity investments. Businesses set to benefit from this funding are mostly in the agriculture, renewable energies and financial services sectors.
“BIO’s investments will be direct or indirect. Indirectly, it will refinance financial institutions such as banks, micro and meso-finance institutions, or will take stakes in private equity funds that provide financing to start-ups and SMEs,” noted Carole Maman, a Chief Investment Officer at BIO.
She was speaking during the official launch of the DFI’s East African office based in Nairobi, in an event that was attended by the Belgian Ambassador to Kenya, Peter Maddens, Belgian Investment Company officials, venture capital firm managers, business owners, government officials and those in academia.
“Through the regional office, we will be able to facilitate efficient provision of sustainable investments in private companies across Kenya, Uganda, Tanzania, Rwanda, Ethiopia, Zambia, Malawi as well as Mozambique,” noted Ms Maman.
During the reception at the Belgian Ambassador’s residence, BIO signed a contract for Sh700 million with TLCom Capital, a venture capital fund that invests in start-ups in sub-Saharan Africa. The SDG Frontier Fund committed yet another Sh250 million.
The institution also committed a nine-year Sh1 billion subordinated debt facility to Victoria Commercial Bank to increase the bank’s capitalisation and strengthen its lending position to SMEs.
Meanwhile, BIO regional office head, Alexis Losseau, noted that having a base in Nairobi, which is regarded as East Africa’s economic hub, will also make it easier for BIO to assess and identify new investment opportunities. This will by extension facilitate the growth of the company.
Alexis noted that the Nairobi base will also play a big part in strengthening the relationships between the European Union, the Belgian Development Cooperation, the Belgian Embassy and partner countries in East Africa.
“Having a presence in Eastern Africa is key to increasing our impact and footprint in the region. It shows BIO’s commitment to supporting private sector development in the sub-region, and it provides BIO with better market intelligence, which will ultimately improve our sourcing capacity to find new investment opportunities,” noted Mr Losseau.
To date, BIO has disbursed about Sh12 billion to financial institutions in East Africa. As of the first half of 2022, it had invested about Sh5 billion in Kenya, Sh3.5 billion in Uganda and Sh400 million in Tanzania, having invested in companies such as the Kenya Commercial Bank (KCB), Victoria Commercial Bank, EFC Uganda among others.
An estimated 62 per cent of its investments are in the form of debt, while 38 per cent are equity investments. A majority of its investment, 49 per cent, is in the finance sector, followed by infrastructure (41 per cent), private equity (6 per cent) and SME sectors (4 per cent).
The Nairobi base will focus on strengthening BIO’s portfolio in the region, and will additionally focus heavily in expanding its lending portfolio to small and medium-sized enterprises, whose growth continues to be impeded due to a lack of access to capital.
“We hope to strengthen BIO's portfolio in the region, also including direct investments in SMEs and in fragile countries. We will build and maintain an effective network of partners and prospects in the region and strengthen the team,” noted Mr Losseau.