Africa’s newest trade finance fund, Savia Trade Finance Impact Fund, is set to pilot later this year and will use a pool of concessional funds to support riskier credit structures, commonly found in the agriculture sector and SMEs. Savia will be Africa’s first trade finance impact fund.
As a debt fund, Savia will seek to address Africa’s unmet demand for trade finance by utilising blended finance – a combination of concessional and commercial funding – solutions, according to a report by Global Trade Review (GTR). It will specifically target smallholder farmers and SMEs with sales of less than $10 million, with a greater focus on those companies involved in intra-African trade.
According to GTR, the fund has already gone through a first round of due diligence with a large regional development bank that it hopes will become its anchor investor. It plans to launch a 12 to 16-month pilot phase in September, for which it is looking at a handful of projects of $1 million each.
Following the pilot phase, Savia will target $200 million of capital: $160 million in medium-term debt, $20 million in equity, and $20 million in concessional funds/grants funding to create a blended finance pool.
These concessional funds will be used to help de-risk selected projects either as a first loss cushion, a temporary subsidy in support of inventory management costs, reduction in interest rates, enhancement to a borrower’s equity base, and other innovative financial structures to create solutions that benefit the SME or agri-producer. Decisions on how and when to allocate these grants will be made by a board that is independent of the investment committee, to ensure donors that grants are being used to maximise the environmental or social impact of each transaction.
Savia aims to target approximately 250,000 smallholders and 2,000 SMEs a year.
At least 50 percent of the fund’s business will go to support the agribusiness supply chain, and most lending will be short-term or under 360 days. On the import side, Savia will target SMEs that want to import manufacturing equipment and construction material, and promote energy efficiency solutions for housing and industry, with two to three-year financing structures.
Targeted countries include Cameroon, Côte d’Ivoire, the Democtratic Republic of Congo, Egypt, Ethiopia, Ghana, Liberia, Malawi, Mali, Morocco, Mozambique, Nigeria, Senegal, South Africa and countries in the East African Community (EAC). – AFRICA BRIEFING