The article reads:

"Risk financiers in East Africa tend to agree on the portion of the lending market that holds the most potential for growth: “Within the USD50,000 to USD1m range is where most of the businesses that have restraints acquiring capital in Africa fall,” says Guido Boysen, CIO of Grofin Africa, a risk finance and development company operating across the continent. A host of new private equity funds popping up in the region focus their attention on the USD50,000 to USD2m deal range that they call “the missing middle” – too big for microfinance, too risky for commercial lending. SMEs are the agreed upon target, but that is largely where the agreement ends."

"Grofin argues that debt is more suited as a financing mechanism for small and medium enterprises in sub-Saharan Africa as it meets entrepreneurs’ demands and allows an easier exit.
Equity fund managers say they look for appropriate exit strategies before investing, and draw on the local networks they cultivate to create multiple options: acquisitions and mergers, partnerships with industry friends, buyouts by foreign players, or the buy and build strategy – the advantage for equity is that the patience of its capital makes many avenues possible."

"Most financiers recognise the need for different kinds of financing for different kinds of business. Grofin's argument is that its model is designed to reach the most prevalent kind of risky SMEs in Africa.
Private equity experts dispute this saying many start-ups need three to four years before their cash flow cycles would allow them to repay debt, so venture capital is often a better option."

"Grofin's approach makes sense as a way to tap immediately apparent short-term prospects, but well-placed patient investment often pays off in Africa, too. Equity is less susceptible to monthly fluctuations and can capitalise on the region's long-term growth."

For the entire Ratio Magazine article please click here: Ratio magazine

At BiD Network we agree that different kinds of financing are needed for different kinds of businesses. It is not a black or white thing. Both pure debt and equity have their difficulties as well. We have therefore been developing BiD royalty based finance models; which are a means of combining debt and equity risk financing with more realistic exit options for financiers.
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