Lagos-based accelerator Cascador and Sterling Bank have launched a $200 million SME Credit Backstop Fund aimed at expanding access to larger, longer-term loans for Nigerian small and medium-sized enterprises (SMEs).

The fund will share credit risk with participating lenders, with the potential to support up to $1 billion in outstanding credit capacity, according to Cascador.

The initiative targets businesses that are ready to take on debt but face difficulties accessing financing through traditional banking channels. Eligible companies will initially be able to access local-currency loans equivalent to $250,000, with the fund aiming to facilitate loans of up to $1 million once fully capitalised.

The backstop capital is expected to come from philanthropic funders, impact investors and development finance institutions.

“By sharing risk with lenders and translating community trust into a bankable signal to lend, the fund can help more businesses access what they need to scale and create jobs,” said Trish Thomas, CEO of Cascador.

The initiative follows the publication of Cascador's white paper, The Multiplier Model, which examines financing constraints facing African businesses.

According to Cascador, only 22% of businesses in sub-Saharan Africa have a bank loan or credit line, compared with a global average of 36%.

The fund is designed to address financing gaps by combining risk-sharing arrangements with borrower identification, assessment and monitoring.

Sterling Bank will work with businesses referred by venture capital funds and venture studios that have existing relationships with potential borrowers.

“This combines a stronger borrower pipeline with structured assessment and ongoing monitoring, giving us greater confidence to provide larger, longer-term loans,” said Obinna Ukachukwu, Group Executive at Sterling Bank.

The fund will operate through Riverwell Platform Holding Limited, a UK-owned entity, and Riverwell Platform Services Nigeria. Reserve capital will be held separately, while Ukachukwu will serve as a director of the Riverwell platform.

The structure builds on a Catalytic Fund previously piloted by Cascador and Sterling Bank to explore financing solutions for growing businesses.

Cascador said it has supported 80 ventures since 2019 and has raised more than $150 million.

The new fund aims to use credit guarantees and risk-sharing mechanisms to encourage lenders to extend financing to businesses that may otherwise struggle to secure loans of sufficient size or duration to support their expansion.