FSD Africa Investments (FSDAi), the investment arm of the UK aid-funded financial inclusion organisation FSD Africa, has announced a $4.5m commitment to Funds set up by Lendable.

This will boost the capacity of alternative financial service providers in sub-Saharan Africa to provide credit to micro, small and medium enterprises (MSMEs) recovering from the effects of the pandemic.

Anne-Marie Chidzero, CIO, FSD Africa Investments, said: “The adverse economic effects brought on by COVID-19 have hit micro, small and medium-sized enterprises particularly hard.”

“Our support to the Lendable funds will meet two pivotal goals of providing small and medium businesses easier access to much needed capital while accelerating broader financial inclusion on the continent.”

Lendable is a fintech startup which provides structured finance to alternative lenders in frontier and emerging markets.

By providing funds to support the lending capacity of alternative financial service providers, these providers will, in turn, provide much needed capital to MSMEs.

This is at a time when MSMEs need help in fueling their recovery from the effects of the pandemic – and when credit from other sources may be difficult to raise.

FSDAi’s investment will strengthen two new funds set up by Lendable to lend to MSMEs.

The first will provide capital of at least $3m to eight financial service providers lending to MSMEs across sub-Saharan Africa.

The second aims to provide $100m in support to fintech companies lending to MSMEs in Africa and other emerging markets.

FSDAi’s initial $4.5m investment into the larger fund in the first quarter of 2021.

FSDAi and Lendable also expect the funds to highlight sub-Saharan Africa as a viable investment destination for global commercial investors.

The funds have the potential to channel even more capital to the continent, further expanding credit markets and access to financial services.

Mark Napier, CEO, FSD Africa, said: “FSD Africa is proud to be working with Lendable. Together, we are offering a timely solution to strengthening sub-Saharan Africa’s financial markets at a time when they need it most. The added liquidity that Lendable’s new fund will supply to credit providers will amplify the impact fintech and micro lenders in Africa have already had in speeding up financial access.”

Daniel Goldfarb, Lendable CEO, added: “We’re incredibly excited about FSD Africa’s investment and the liquidity it will enable for fintechs providing financial services during this critical time. Digital financial services have become a critical lifeline for so many Africans. FSD Africa’s commitment to continuing to provide catalytic capital to the African market throughout COVID is a testament to their leadership in the sector, and we are proud to solidify our partnership with their investment in Lendable’s facilities.”