Apply now to the GroFin Small and Growing Businesses Fund via VC4Africa. The fund focuses on both start-up and existing small and growing businesses in Nigeria, Kenya, Uganda, Tanzania, Rwanda, South Africa, Zambia, Ghana and Egypt.
Read an exclusive interview with Walter Ogwal, GroFin’s East Africa Regional Investment Director:
GroFin is a development financier that provides small and growing business owners access to a combination of tailored finance and experienced business support services. The organisation manages committed capital in excess of USD 500 million.
“We are the most experienced small and growing business investor in Africa” says Walter Ogwal, GroFin East Africa Investment Director. “GroFin’s global staff make up a network of small and growing business experts who are located in fourteen offices across Africa and the Middle East and are available to our clients through their personal Investment Executive. To-date, GroFin has helped to sustain more than 18,000 jobs, provided business support to over 8,000 SMEs, and invested in the dreams of more than 600 business owners.”
SME financing gap, the missing middle, and many other terms are used to define the capital constraint for African SMEs. Can you explain the issue and what GroFin is doing to address it?
“African SMEs often face the challenge of access to finance owing to their perceived high risk profiles, lack of capital, credit and financial records, inadequate management and business experience along with their informal characteristics and lack of collateral. They therefore face the likelihood of being rejected by traditional financiers while others fall into the conundrum of being too small for private equity and just too large for microfinance – thus deemed the missing middle.
At GroFin we are addressing the specialised needs of these small and growing businesses in the missing middle by using a viability rather than collateral based model and pre-investment support to help business owners access the patient capital they need to grow sustainable enterprises.
The combination of tailored risk capital along with value adding business support underpins our philosophy of supporting small and growing businesses in the region. Business support is in the form of access to enterprise information, market linkages, financial management and guidance on identifying and managing risks. We are a partner to our clients, accessible at anytime and ready to offer the guidance and support they need throughout the terms of the loan.”
Can you highlight what makes GroFin’s approach to SME financing unique from others?
“While traditional lenders provide finance and fixed repayment schedules, we offer our clients integrated business support with tailored finance and repayment schedules based on the business’ projected cash flow. At GroFin, we evaluate each business based on the entrepreneur’s drive, commitment, track record, and potential viability.
Based on these factors, we select those businesses that have the highest potential to not only become sustainable enterprises but also generate positive socio-economic impact such as local content, production, and job creation within their communities. Throughout the relationship, we connect our clients to strategic businesses and stakeholders, help them integrate into the supply chains of larger companies, give them guidance on business formalization, marketing, financial management and other valuable skills that build the entrepreneur’s capacity.
We understand that as a start-up or existing small and growing business, you may not have the required collateral, track record or management expertise. That is why we provide each entrepreneur that approaches GroFin with pre-investment business support to help them formulate a viable business plan while identifying and developing actions to mitigate potential risks. Once this process is complete we evaluate the business owner’s commitment, willingness to run an ethical enterprise, and their plan to see if they are the right fit for our integrated solution.
For SMEs, business support is sometimes more important to the long-term success of the business than finance. GroFin business support includes (among others), marketing, good financial practices, connecting the client with the best suppliers, and leveraging our international network in other ways to assist the entrepreneur.
Our in-house business support delivered by experienced, on-the-ground and fully engaged teams mean that our clients have ready access to trusted advisors providing small and growing business owners with what we offer. This unique approach enables investee companies to enhance upside opportunities to their business while effectively managing any downside risks. This is the GroFin difference — Support beyond finance.”
Please introduce the SGB Fund, and how does this augment the GroFin portfolio i.e. what are the unique traits?
“Incorporated in August 2014, the Small and Growing Businesses (SGB) Fund is a successor to the GroFin Africa Fund (GAF) and is the first unlimited life fund specially designed to benefit entrepreneurs in Kenya, Uganda, Tanzania, Rwanda, Nigeria, Ghana, South Africa, Zambia and Egypt. The SGB Fund features the signature GroFin model of appropriate finance and end-to-end business support facility. This fund intends to invest in 80-100 entrepreneurs each year with deal size ranging from US$100,000 to USD 1.5 million and is expected to assist African businesses in sustaining 32,000 jobs over the next 10 years.
Notably the development impact is critical in any investment along with its impact to bottom of the pyramid clients and the local content aspect. We are excited and optimistic that the fund is poised to further expand the GroFin model in the region.”
What is your advice to entrepreneurs seeking partnership with GroFin?
“If you are an experienced and committed entrepreneur then GroFin really should be your first destination. GroFin will be your partner right from inception and throughout the duration of the investment term to guide you through making the tough business choices required when operating in whatever environment. GroFin is keen to work with entrepreneurs who are fully committed and involved in their businesses and who desire to undertake sustainable investments while remaining fully compliant and responsible.”
How do you see the VC4Africa community, our partnership with GroFin, and the opportunity to work together?
“VC4Africa shares our vision, they are there for African entrepreneurs just like GroFin. That’s why we are pleased to be featured on your site. GroFin plans to engage VC4Africa’s entrepreneur network to find new clients who share our vision of creating successful enterprises that generate positive socio-economic impact.”
What do you feel are the key financial risks entrepreneurs need to take into consideration when assessing financing options?
“First of all, finance is not a guarantee for success. There are other issues to contend with in any business. Secondly, when assessing financing options, entrepreneurs need to know that they can lose everything—their business, home, and personal belongings. This is a big risk for the entrepreneur and her/his family. This is why we at GroFin know that sometimes the best thing we can say is, ‘No, your plan is not viable.’
It is always good to compare the financial terms being offered. If you are not sure consult your partners, family, good friends, even the internet to make sure you understand the depth of what you are signing. As an entrepreneur you should be fully dedicated to your business as no finance, no perfect business plan or obtaining opportunity will guarantee long term success. Above all, your financier should act as and be a trusted advisor to (and not just a passive investor in) your business. A trusted partner is one who shares in the risks of the business as well.”
Do you have a message for fellow investors, or a final message for members reading this article?
“We have several different funds operating in Africa and the Middle East. Each of our investors have specific goals / vision. Whether it is about development, job creation or building a strong SME sector, GroFin is capable of helping funders and investors reach their developmental goals. Both GroFin and our investors are proud of our quality and impactful work delivered by our experienced and committed staff across the continent.
Our investors share our passion, and associate with our vision of enabling sustainable prosperity on the continent through mission driven investments in the otherwise high risk small and growing business sector.”
VC4Africa offers Pro Accounts for individual investors and the Pro Partner option for organizations. As with GroFin, investors join VC4Africa in a shared effort to grow the African venture capital space. We can achieve more as an investment community when we join forces and collaborate. Tap into VC4Africa’s growing pool of entrepreneurs and plug portfolio companies into a robust support framework needed to grow their enterprises successfully.
The Pro account gives individual investors a dashboard they can customize, the ability to set up alerts, tailored investor updates, access to venture documents and the ability to contact entrepreneurs directly, as well as exclusive networking opportunities for individual investors.
With the Pro Partner option a family office, SME investor, Impact Fund, VC firm or Angel Network gets prominent visibility within VC4Africa network, can fully leverage our outreach channels and platform functionality to launch campaigns, source and screen applications. Each partner receives support from a dedicated account representative.