In the Democratic Republic of Congo (DRC), households and businesses face many challenges such as poor infrastructure, prolonged conflicts, and widespread poverty that prevent financial inclusion. The 300,000 micro-, small, and medium-sized enterprises (SMEs) in the DRC have a finance gap of $6.8 billion USD as they may be too large for microfinance but not large enough to access loans from commercial banks. Without financing, these enterprises will only grow as fast as allowed by their internal resources. And, as SMEs play a crucial role in economic development (creating 7 out of 10 jobs in emerging markets), limited local SME growth means limited employment opportunities for those living in the DRC.

Despite these challenges, the DRC has had faster economic growth than the sub-Saharan median, which has been below 5%, over the past few years. Only two years ago, the country’s peak gross domestic product rate was 8.8%, one of the top five rates in the region, showing progress in economic growth.

Partnering for sustainable funding in DRC

Over the past two years, the Southern and Central Africa (S/CA) Hub increased its number of DRC-based innovators. To help these innovators scale their innovations, WE4F maintains a strong focus on improving local enabling environment conditions for innovations and facilitating end-user financing.

To continue this work, in July 2024, the S/CA Hub signed a memorandum of understanding (MoU) with Equity Banque Commerciale du Congo (EquityBCDC), a subsidiary of Equity Group Holding. As one of the largest private sector banks serving MSMES in the DRC, this partnership represents a promising opportunity to support DRC-based innovators while promoting financial inclusion, financial literacy, social investment, and improved access to financial credit for low-income households.

Under this MOU, EquityBCDC and the S/CA Hub will work together to empower innovators and their end-users. Eligible innovators will have the opportunity to benefit from EquityBCDC’s debt and grant funding support to expand their operations, with the S/CA Hub Brokering Unit aiding innovators as they navigate the application process. End-users, mainly smallholder farmer cooperatives, using WE4F innovators’ products and services will benefit from the partnership through EquityBCDC’s facilitation of micro-loans and credit, financial literacy, and entrepreneurial skills capacity building.

Getting innovators investment ready

A study by the KfW Development Bank shows that most SMEs are ill-prepared to attract financing and require technical support before and after investment to ensure returns and sustained growth. The research shows that one of the reasons that entrepreneurs failed to secure loans is due to a lack of understanding of the procedures, documentation, and systems in place to successfully apply.

The S/CA Hub Brokering Unit supports innovators’ investment readiness by bolstering their capacity through the strengthening of their knowledge on financing options, processes, and requirements. This support includes the development of tailored financial models and investor teasers, which are essential tools for effectively communicating a company’s financial health, growth potential, and investment proposition to potential investors.

By strengthening the financial capacity of innovators and equipping them with the necessary knowledge and material, they become able to attract the capital they need to scale their businesses – putting innovators in a better position to secure capital from financiers like Equity Bank. The increasing number of innovators in the DRC indicates the growing demand for bridge and expansion financing in the country, as companies work to meet consumers’ growing demand for goods and services, and to create sustainable livelihoods for people at the base of the pyramid.

Through this partnership, innovators in the DRC – or those expanding into the country – can leverage this opportunity even after the lifespan of the WE4F program. Information shared with EquityBCDC, such as innovator profiles, will remain with the bank as they will continue to provide grants and credit lines to the innovators.

To learn more about the S/CA Hub’s work with innovators, contact tebogo.masombuka@tetratech.com.

To learn more about investing in companies that are supported by the S/CA Hub, contact kmukuwa@opencapital.com