UK development finance institution British International Investment (BII), Zambia’s National Pension Scheme Authority (Napsa) and Swedish development finance institution Swedfund have launched the Growth Investment Partners Zambia (GIP Zambia) investment company to provide long-term, flexible capital, primarily in local currency to small and medium-sized enterprises (SMEs), in Zambia.

GIP Zambia has secured an initial fundraising close of $70-million. With $37.5-million from BII, alongside anchor commitments of $17.5-million from Napsa and $15-million from Swedfund, GIP Zambia aims to address the persistent financing gap that has long constrained the growth of Zambia’s SME sector.

Over the next 15 years, GIP Zambia is expected to deploy more than $300-million to 150 SMEs, thereby catalysing the creation of new jobs and enhancing the readiness of SMEs for investment by more traditional capital markets.

The platform will prioritise investments in several sectors that drive economic growth, including manufacturing, agriculture and financial services, with a strong focus on inclusive business ownership, particularly supporting women- and locally-owned and -led enterprises, the organisations say.

SMEs are the backbone of Zambia’s economy, contributing over 70% of GDP and 88% of employment.

However, more than 40% of SMEs surveyed by BII report challenges in accessing financing that addresses their growth needs. This is often owing to structurally constrained bank lending and limitations of the traditional private equity model, such as large ticket sizes and short investment horizons.

GIP Zambia is designed to help close this gap by offering patient, flexible capital needed to fuel the long-term growth of Zambian SMEs, the organisations say.

“GIP Zambia’s financing solutions complement existing offerings by banks and others by providing features such as longer tenors, reduced collateral requirements, more flexible repayment arrangements and risk sharing and tailored business support.

“These offerings are designed to empower SMEs to grow sustainably, create jobs, and deepen their role in the national economy,” the finance institutions say.

GIP Zambia will support the Southern African country’s long-term development goals under Vision 2030 and the eighth National Development Plan, both of which prioritise private sector development, job creation and economic diversification.

GIP Zambia builds on the successful launch of GIP Ghana in 2023, and demonstrates a scalable and replicable model for SME financing across Africa.

“Zambia’s SME sector holds immense potential to drive inclusive growth and create jobs, but the right kind of capital remains elusive for many businesses. GIP Zambia builds on our experience of launching GIP Ghana and reflects our long-term commitment to building local financing ecosystems that work for SMEs and entrepreneurs,” says BII CEO Leslie Maasdorp.

“Catalytic development finance should work with domestic partners to mobilise capital, support entrepreneurs, and deliver real economic transformation,” he adds.

“The strategic partnership with BII and Swedfund allows us to channel much-needed patient capital into Zambia’s SMEs,” comments Napsa chairperson Shipango Muteto.

“We are confident that, by supporting the growth of these local businesses, we will catalyse job creation and stimulate broader economic activity. This investment also directly contributes to growing our membership base, thereby strengthening the long-term sustainability of the pension fund and securing the future of our members,” he notes.

GIP Zambia is a step forward in addressing the financing challenges faced by Zambian SMEs, says BII South Central Africa director Dirk Holshausen.

“By offering long-term, flexible capital in local currency, we are helping to unlock the potential of local entrepreneurs and drive inclusive economic growth,” he adds.

“Access to long-term financing is essential for SMEs to grow their businesses in Zambia and beyond. Through our investment in GIP Zambia, Swedfund sees an opportunity to provide local currency financing tailored to the needs of Zambian SMEs,” says Swedfund chief investment officer Marie Aglert.

GIP Zambia CEO Musonda Chipalo adds that Zambian entrepreneurs have drive and creativity, but many face the same obstacle – a lack of appropriate, long-term finance to grow their businesses sustainably.

“GIP Zambia is here to change that by providing long-term, flexible capital in local currency, designed around the real needs of local businesses. By mobilising domestic capital and working with international partners, we are driving inclusive growth and creating a stronger economy that truly works for Zambians,” he says.