BluePeak Private Capital Fund II (BPCF II), a private credit fund aimed at underserved mid-market businesses in Africa, has received a commitment of $80 million from four European Development Finance Institutions (DFIs).
The investment, which was announced by BluPeak on Tuesday and spearheaded by the Swiss Investment Fund for Emerging Markets (SIFEM), FMO, Swedfund, and British International Investment (BII), intends to close a long-standing financing gap that has impeded the expansion of small and medium-sized businesses (SMEs) throughout the continent.
African SMEs’ $330 financing deficit
The African Development Bank estimates that the continent’s mid-market companies, which are frequently too big for microlending but too small or risky for traditional bank lending, experience an annual financing deficit of $330 billion.
These businesses, which include industrial suppliers, pharmaceutical companies, and food processors, are essential for economic diversification and job creation.
However, a lack of credit history or inadequate collateral makes it difficult for many to obtain loans.
BluPeak to address financing gap
To address this gap, BluePeak’s African private credit fund offers flexible debt financing to well-established, cash-flow-positive companies in industries like financial services, pharmaceuticals, and food manufacturing.
The fund is eligible for the 2X Challenge, a global initiative that promotes women’s economic participation because it also prioritises environmental, social, and governance (ESG) compliance with a focus on gender inclusion.
As an alternative to conventional bank financing, private credit—non-bank lending to businesses—has grown in popularity throughout the world.
In Africa, where capital markets are still undeveloped and banking systems are still risk averse, private credit funds like BluePeak’s provide a lifeline to companies looking for expansion capital without giving up equity.
Breakdown of European DFI’s commitments
The following is a breakdown of the European DFIs’ commitments:
- BII (UK): $30 million
- Swedfund (Sweden): $20 million
- FMO (Netherlands): $15 million
- SIFEM (Switzerland): $15 million
The trend of European DFIs combining their resources to reduce the risk of investments in emerging markets is exemplified by this partnership. By supporting a locally managed fund with a track record of success—BluePeak’s first fund was introduced in 2021—the institutions hope to show that private credit is a viable asset class and possibly draw in additional institutional investors.
Comments from European Development Finance Institutions (DFIs)
BII’s Managing Director and Head of Africa, Chris Chijiutomi, presented the investment as a two-pronged initiative. “This partnership extends our reach and provides growth financing to empower businesses in Africa. Its success will serve as a model to attract more private capital,” he noted.
The goal of Swedfund is to reduce poverty. Senior Investment Manager Jakob Larsson stated, “We invest to increase financial inclusion and strengthen the private sector’s ability to create jobs, especially for women and young people.”
FMO, which had previously contributed to BluePeak’s initial fund, emphasised how well it matched its goal of inclusive growth.
According to Annemarie van Duijn, Manager of Private Equity Global Funds at FMO, “There is a clear funding gap for businesses that seek to retain ownership while still needing growth financing.”
SIFEM placed a strong emphasis on long-term economic resilience through its portfolio manager responsibilities. Anthony Mwangi Njoroge, Principal and Co-Head of the Africa Fund of Funds, stated that “investing in growth-orientated businesses is essential to driving development.”
BluPeak’s significant milestone
Founded by former executives of Duet Private Equity, BluePeak has established itself as an expert in defensive industries, or those that perform consistently even during recessions.
In spite of the volatility of the global market, its first fund supported businesses such as a pharmaceutical distributor in West Africa and a dairy producer in Morocco.
Walid Cherif, BluePeak’s Managing Partner, described the DFI backing as a “strong vote of confidence” in the firm’s strategy. “Raising Fund II in less than four years since Fund I’s first close reflects sustained investor confidence,” he said.
Obstacles despite optimism
Obstacles still exist despite the optimism. For private credit lenders, the complicated business environments of Africa, regulatory irregularities, and currency risks present difficulties.
Furthermore, although other investors’ risk is reduced by DFI participation, institutional capital, the entry of investors, especially insurers and pension funds, has been sluggish into the African private credit market.
If BPCF II is successful, it may contribute to a change in attitudes by demonstrating that private credit can produce quantifiable development impact in addition to financial returns. For now, the fund is an important step towards closing the financial gap in Africa, one loan at a time.