Small and growing businesses (SGBs) are the backbone of East Africa’s economies. They drive employment, anchor local value chains in food, manufacturing and trade, and sustain communities across the region. Yet, for the most part, they cannot access the finance they need to grow.
FSD Africa Investments’ (FSDAi) investment in iungo Capital through its Nyala Facility is a direct response to that reality.
The market failure
The financing gap facing small and growing businesses has proven stubbornly persistent. Small and Growing Businesses (SGBs) are often too large and operationally complex for many microfinance institutions, whose lending methodologies, check sizes and products were primarily designed to serve sole proprietors and household enterprises. Yet, they are too early-stage and under-collateralised for commercial banks, which require documented cash flows, formal collateral, and operating histories that most SGBs simply cannot provide.
The result is a missing middle: a segment of businesses with genuine growth potential and real economic weight, systematically locked out of affordable finance. Across East Africa, this gap has constrained job creation, suppressed local value chains, and left labour-intensive sectors such as agri-processing, light manufacturing and trade chronically undercapitalised. This structural failure penalises not just individual businesses, but also the broader economies that depend on them.
What iungo does differently
Operating across Uganda, Kenya, Rwanda, and Tanzania, iungo Capital provides USD-denominated loans of up to US$500,000 to early-stage SGBs. These loans are structured for up to 36 months and paired with hands-on technical assistance covering business operations, financial management, and ESG compliance.
Rather than treating these businesses as high-risk exceptions, iungo has spent eight years developing the systems, market intelligence, and sector expertise required to assess, invest in and manage them effectively. This track record demonstrates that disciplined, fit-for-purpose and locally-rooted lending to this segment can be both highly impactful and commercially sound.
Furthermore, iungo applies a rigorous gender-lens investment framework that goes beyond basic compliance:
- Over 80% of its portfolio meets at least one 2X Challenge criterion.
- The firm proactively sets and monitors gender-outcome targets for portfolio companies, backed by dedicated technical support to support implementation
- Internally, 60% of iungo’s own team are women, and the firm recently promoted local East African staff to partner-level positions as a deliberate commitment to building regional leadership rather than managing East Africa from the outside.
Why FSDAi invested
FSDAi’s US$1.25 million equity commitment is made through the Nyala Facility, which provides patient, flexible capital to Alternative Local Capital Providers with a gender lens investment strategy. These are locally anchored fund managers building the financial infrastructure that conventional lenders leave behind.
Importantly, this investment is highly catalytic. Despite its strong track record, iungo had reached a structural ceiling: financial covenants on its existing debt restricted further borrowing without a fresh equity injection, and its corporate structure was deterring the institutional investors needed to scale. While prospective co-investors were interested, they were waiting for a credible first-mover to de-risk the process. This investment is intended to have a strong demonstration effect. By validating an open-ended fund model focused on Small and Growing Businesses (SGBs), FSDAi aims to demonstrate that SGBs are an investable asset class. In turn, building market confidence, encouraging replication and crowding in additional institutional capital to a segment that is economically significant but chronically underserved.
FSDAi’s commitment breaks that deadlock.
“FSDAi’s investment helped unlock a key constraint for iungo. By adding to its equity base, we helped create the foundation for iungo to raise additional debt capital and finance more small and growing businesses across East Africa. This is the catalytic role we want to play: backing strong local capital providers at the point where our capital can crowd in others and expand access to appropriate finance for underserved businesses.” Zee de Gersigny, Investment Principal for Early-Stage Ventures at FSDAi.
What this opens up
This investment is intended to have a strong demonstration effect. By validating an open-ended fund model focused on SGBs, FSDAi aims to show that SGBs are an investable asset class — building market confidence, encouraging replication, and crowding in additional institutional capital to a segment that is economically significant but chronically underserved.
Over the investment period, iungo is expected to finance at least 30 businesses, support the creation or preservation of 800 jobs, and ensure that at least 60% of those businesses are founded, owned, or led by women.
That demonstration effect is already taking shape. FSDAi’s catalytic commitment is expected to unlock significantly larger pools of institutional capital enabling Iungo to significantly expand its operations and reach across East Africa.
iungo’s trajectory, evolving from a small, concessionally funded vehicle to a properly structured, institutionally backed capital provider, is the type of market development FSDAi exists to accelerate. By backing iungo at this pivotal stage, FSDAi is helping lay the groundwork to prove what local capital providers can achieve, signalling a promising new direction for SGB finance across East Africa.
About this series
Behind the Investment is FSDAi’s series on the decisions, structures, and signals behind our capital. Each post takes a single investment and unpacks the market gap it addresses, the thesis we underwrote, the risks we accepted, and the change we expect it to catalyse across Africa’s financial markets.
Contact: Joyce Waihiga, Manager, FSD Africa Investments.
