Investing in SMEs. Creating Impact


COSEF is the first locally domiciled impact investment company in Uganda that provides financing and technical assistance to growth companies in Uganda, Ethiopia, Rwanda, Tanzania and Kenya, operating within the agro-processing, financial inclusion and clean energy sectors. The company’s objective is superior financial returns for investors and measurable social impact.


East Africa is an excellent market for impact investment—and one that remains under-served by venture capital/private equity firms.

Uganda-There are over 3.0 million Small and Medium sized Enterprises (SMEs) in Uganda (according to Uganda Bureau of Statistics (UBOS)). These small businesses with high growth prospect and good return on investments are excluded by formal financial institutions in the country because of lack of formal collaterals. Formal financial institutions only lend to large well established corporations with adequate assets to act as collaterals.On the other hand, microfinance institutions only provide loans up to an average amount of $10,000 for micro-enterprises.The very few internationally based private equity funds that invest into Uganda have also not helped as 99% make equity investments (typically 1 investment per fund of atleast $2,000,000 in 5 years) into large well-established corporations which already are being backed by formal financial institutions.

Ethiopia-Over the past decade, Ethiopia has achieved high economic growth, averaging 10.7 percent per year (World Bank, 2013) establishing the country among the fastest growing economies both in Africa and the developing world. The sole promoter of economic growth in Ethiopia is the Government, through the public sector-led growth strategy centered on high public investments. However the private sector dominated by SMEs is highly underserved. Banks only lend to large firms with adequate collateral. Moreover the average value of collateral needed for loans in Ethiopia is also very high compared to other regions of the world as well as to other developed economies in Africa. On average, Ethiopian firms require 234 percent of the loan amount for collateral, compared to 134.3 percent in Eastern Europe and Central Asia, 120.8 percent in Kenya and 103.6 percent in South Africa. SMEs also do not have venture capital funding for adequate financing for technical assistance, start-ups, seed investing or any stages of investing in their businesses. 

Rwanda-According to the 2008 PSF study, there are over 72,000 SMEs operating in Rwanda. Rwandan medium sized enterprises are well-organized businesses that are individually or jointly owned. They have set administrative processes, qualified personnel and trained staff, employ between 50-100 people and account for 0.22% of businesses in Rwanda, contributing 5% of total private sector employment.The biggest challenge facing SMEs in Rwanda is lack of access to financial services. According to PSF survey, financial institutions perceive SMEs as high risk and are therefore inflexible in terms of collateral and repayment terms. In addition, most financial products from commercial banks are not suitable to the agricultural sector, where most SMEs currently operate, and existing regulations limit the total funds available for lending.SMEs also lack access to technical and business skills. SMEs themselves identify a variety of skills gaps in areas including ICT, technical and industrial knowledge, finance, accounting and management. Many SMEs have rudimentary production facilities, low quality products and underutilize appropriate technologies. There is also limited innovation and competitiveness in the SME sector caused by a lack of technical and managerial skill.

Tanzania-Tanzania is rapidly moving towards a middle-income status as the economy grew by an average of 6.5% per year in the past decade. The “Tanzania Development Vision (TDV) 2025” highlighted small and medium-sized enterprises (SME) sector as one important contributor to the country’s long-term development. Tanzania’s SME sector consists of more than 3 million enterprises which contribute to 27% of overall GDP.However, there are key issues hindering development of SMEs in Tanzania. This includes poor business development services and limited access to financing, among others.

Kenya-A National Economic Survey report by the Central Bank of Kenya (CBK) indicate that SMEs constitute 98 percent of all business in Kenya , create 30 percent of the jobs annually as well as contribute 3 percent of the GDP.Although small and medium enterprises (SMEs) continue to create numerous jobs and boost the country’s GDP, they face a number of challenges that always hamper their growth.Primary factors such as lack of business development services and lack of capital affect potential for growth of MSMEs in Kenya.

Thus a huge funding gap exists for East African small and medium sized companies which have high growth potential and significant returns on investment.

COSEF’s hybrid model to SME development bridges this gap by providing much needed financing, comprehensive Business Development Services (BDS) and Environmental, Social and Governance (ESG) improvements to enable the enterprises grow sustainably and thus provide superior financial returns to investors.


We focus on agro-processing, financial inclusion and clean energy, the 3 key sectors with high demand for products and services. We believe that working together with key industry leaders in these key sectors, we are able to identify, nurture, and harvest strong companies with superior management that can lead to excellent returns for investors and measurable social impact.

Agro-processing-Agriculture is a core sector of East Africa’s economy, contributing over 23% of GDP at current prices and accounting for over 48.5% of total exports. The industry has provided a basis for growth in the agro-processing sector.Over 60 percent of East Africa’s population is engaged in agriculture. Agriculture has grown rapidly over the last 8 years. This has presented immense opportunities for growth in the agro-processing sector.With high demand for processed products from national, regional and international markets, especially in the following product lines-coffee, honey, milk, fruits, hides and skin, soya bean and maize, attractive emerging companies have come up to supply various products but still cannot meet the high demand due to lack of growth financing.

Financial inclusion-A large number of low income people in Uganda, Rwanda, Ethiopia, Kenya and Tanzania are considered unbankable by banks or formal financial institutions and are thus excluded from financial services. COSEF invests into microfinance institutions extending affordable financial services to low income micro-entrepreneurs in the region.Also financial technology is one of the rapidly growing sectors of the East Africa’s economy. Innovative emerging companies have come up and are disrupting businesses, such as companies allowing people to earn money from paying their bills on top of paying from the comfort of one’s home at any time of the day. Fintech companies are encroaching upon established markets, leading with customer-friendly solutions developed from the ground up and unencumbered by legacy systems.With agriculture being the backbone of East Africa’s economy contributing over 23% of the GDP, our focus in this sector are companies leveraging technology to disrupt agricultural production by redefining access to information and inclusive credit services for farmers and traders, through use of financial and non-financial data to underwrite credit to the financially excluded communities/and or using technology to provide financing to businesses supplying agro-products on the national and international markets.And with a high annual population growth rate, there is enormous pressure on the East African governments to provide health care services to the people. Less than 40% of the population have access to public health care facilities which tend to be concentrated in major urban areas. Our other focus under this sector are companies redefining accessibility and affordability of health care services.

Clean energy-The energy economy in East Africa is largely focused on collecting, distributing, and consuming wood fuels (wood and charcoal) to satisfy household demands for cooking. As much as 90% of all primary energy consumed in  East Africa is biomass based. Virtually, all of East Africa’s wood fuel comes from forests-over 90% of all round wood harvests are for charcoal and fuel wood. As can be expected, much of the demand for fuel wood is satisfied through deforestation.Deforestation greatly affects measures to broadly affect the carbon balance in biomass (and soils) which are important in mitigating climate change. Such measures broadly involve conserving existing biomass resources, increasing carbon stocks in new forests, and substituting of wood products for more energy intensive materials.Because of the devastating effects of deforestation, East African governments are advocating for ban on the usage of firewood and charcoal as household energy sources for cooking.Concerning electricity generation, East Africa has low installed capacity, mostly consisting of hydro power. Access to electricity in East Africa is very low (much lower in rural areas). Annual demand for electricity is growing rapidly.The high demand for electricity and alternative energy cooking solutions have seen the emergence of innovative companies providing on and off-grid energy solutions.


We consider-We consider-Quality of management team; Quality of the product or service; Financing request between $100,000 and $3,500,000 structured as either Equity or Debt; Size and growth rate of the market; Ability to achieve market leadership; Capital requirements, now and in the future; Competitive environment; Social impact and Exit potential.


Plot 54 Persee Street, Masindi, Uganda
Ethiopia, Kenya, Rwanda, Tanzania, United Republic of, Uganda
Agribusiness, Clean technology and energy, Financial services, Fintech