TLG Capital has successfully completed the $120 million second close of its Africa Growth Impact Fund II (AGIF II), a significant milestone for private credit in the region. Led by prominent investors Proparco and Calvert Impact Capital, the fund reinforces its strategy to support small and medium-sized enterprises (SMEs). This latest capital injection, bringing the total number of investors to 22, will expand crucial access to finance for businesses across underserved African markets.
An Innovative Approach to SME Financing
The fund's strategy is centered on a proprietary model known as Bank Originated and Mitigated Assets (BOMA). Through this approach, TLG Capital originates loans to African SMEs in partnership with local banking institutions across the continent. Each loan is uniquely structured with a 100% principal guarantee from the originating bank, effectively mitigating credit risk for investors.
This innovative structure provides a dual benefit for the African market, addressing critical challenges for both businesses and investors. SMEs gain access to financing with longer tenors than typically offered by local banks, providing the runway needed for substantial growth. Meanwhile, investors are offered an adjusted risk profile, replacing direct SME credit risk with the institutional obligation of a regulated African bank.
Investor Confidence and Market Validation
The second close attracted a diverse group of 22 investors, including new commitments and increased allocations from existing backers like Swedfund. Notably, 48% of the committed capital was sourced from outside the development finance institution (DFI) community. This signals a growing market conviction in African private credit as a viable institutional asset class ready for commercial capital.
Key investors have praised the fund's unique ability to provide meaningful downside protection while navigating complex markets. Tibor Asboth of Proparco highlighted how the BOMA approach helps improve investment conditions for international investors by mitigating credit risk. Similarly, Calvert Impact's Maya Burney noted TLG's demonstrated capacity to innovate in line with what commercial private capital requires.
Tangible Impact Across the Continent
Since its $75 million first close a year ago, AGIF II has already demonstrated significant momentum and impact. The fund has deployed capital to nine SMEs across seven different countries, with debt facilities ranging from $5 million to $15 million. This rapid deployment underscores the high demand for tailored credit solutions among Africa's growing businesses.
The fund's investments are already yielding profound social and economic benefits, sustaining over 850 jobs. For instance, capital has been used to enhance aluminum recycling in Nigeria, expand fiber internet access in Djibouti, and finance lower-cost schools in Kenya. A significant portion of the capital is directed towards UN Least Developed Countries and conflict-affected regions, amplifying its developmental impact.
Strategic Partnerships and Future Outlook
AGIF II's mission is further strengthened by a strategic partnership with the UK's Foreign, Commonwealth & Development Office (FCDO) through its Manufacturing Africa programme. This collaboration enhances the fund's capacity to support sustainable industrialization and job creation. The fund's focus on gender equality and local ownership has also earned it recognition from the Gender 2X Challenge.
The successful $120 million second close of AGIF II marks a pivotal moment for SME financing in Africa. By pioneering a de-risked investment model, TLG Capital is effectively bridging a critical financing gap and unlocking new streams of commercial capital for the continent. This achievement not only validates the fund's innovative strategy but also signals a promising future for private credit as a powerful engine for sustainable economic growth.