In this ‘MSME Champions’ interview, Samuel Ndonga of Samawati Capital Partners describes how the firm mobilizes public and private capital for SME growth in the agriculture sector. ‘MSME Champions’ is a series of interviews capturing the expertise and experiences of individuals and institutions supporting enterprises in the missing middle of agriculture, as part of an advocacy campaign for the International Day for Micro, Small and Medium-sized Enterprises (MSMEs) on 27 June 2024.
The International Day for Micro, Small, and Medium-sized Enterprises (World MSME Day) is an opportunity to reflect on the key role of enterprises in the missing middle of agriculture. Please tell us why and how Samawati Capital Partners supports their growth.
MSMEs in sectors such as agriculture present one of the greatest opportunities for inclusive and sustainable development in Africa but often lack optimal financing to support their growth and contribute toward sustainable job creation & improved livelihoods for local communities, including women and youth.
Samawati’s mission is to address the lack of access to finance by supporting the design, implementation, and management of innovative financing mechanisms targeted at MSMEs in the agricultural sector. We are committed to mobilizing both public and private capital to enable the growth of a robust private sector in Sub-Saharan Africa that drives socioeconomic development and transformation in the region.
Please describe some of the challenges your institution faces when lending to agricultural MSMEs in Sub-Saharan Africa. What are some of the innovative approaches you use to navigate them?
MSMEs face a lot of challenges that limit their ability to access financing, especially from traditional lenders, including but not limited to lack of investment readiness, insufficient collateral to secure their borrowing, weak governance and management systems, among others. The cost of serving MSMEs tends to be high due to the time and resources that need to be invested to get a transaction done.
Our approach has been to partner with technical assistance providers to address whatever capacity challenges we identify that need intervention to prepare the MSMEs for investment, and structuring innovative funding mechanisms and partnerships that address challenges related to lack of collateral e.g. CMA financing, partnering with local financing institutions on co-financing and portfolio monitoring, among others.
What message would you like to share with donors, commercial banks and other players that hesitate to lend to agricultural enterprises?
For donors, I would like to urge them to consider supporting more locally-based capital providers and/or fund managers that are rooted in their economies, deeply understand the dynamics within their markets and that are able to innovate in a way that incorporates local nuances. These managers are also invested in their markets for the long term and can be very complementary to the existing ecosystem players. This will require a different approach including supporting first-time fund managers to launch new vehicles for their markets as well as non-traditional financing mechanisms that are potentially less understood but which could hold promise for scale and impact.
For commercial banks and other players, my recommendation would be for them to invest time in understanding the agriculture sector and creating the necessary partnerships that could bring knowledge, access to markets and technology, and appropriate funding to enable their agri-finance strategies to succeed. One cannot succeed in supporting the sector in isolation and so all the ecosystem players need to come together to make it happen. However, the interest or intention to do it has to be there and then followed by deliberate actions to make it happen.
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Meet the Champion
Samuel Ndonga is the co-founder and Managing Director for Samawati Capital Partners and an Adjunct Faculty member at Strathmore University Business School (SBS). Building on 17+ years of experience, Samuel currently co-leads the team at Samawati Capital Partners, a firm with offices in Nairobi and Kampala that partners with investors, non-profits, businesses, and the public sector to create sound investments and effective, sustainable impact initiatives through SMEs in sectors that can drive robust growth in Africa including food and agribusiness, renewable energy, financial inclusion, healthcare, and education.