TLG Capital announces the second close of Africa-focused private credit fund, AGIF II. It raised $120 million from 22 institutional investors to expand financing for small and medium-sized enterprises (SMEs) across the continent.
The milestone comes just 12 months after the fund’s first close and points to a growing institutional interest in Africa’s private credit market, an asset class that is increasingly being viewed as an alternative to traditional venture capital and commercial bank lending.
Unlike equity investments where businesses have to give up ownership, private credit provides companies with debt financing. This makes it particularly attractive to established SMEs looking to expand while retaining control of their businesses.
At the heart of AGIF II is TLG Capital’s BOMA (Bank Originated & Mitigated Assets) model, which partners with African banks to originate lending opportunities while using guarantees from those same institutions to reduce investment risk.
According to the company, this structure has helped attract institutional investors that have traditionally been cautious about lending directly to African SMEs.
Among the investors participating in the fund are African Reinsurance Corporation (Africa Re), Calvert Impact, Proparco and Tsao Family Office, alongside other institutional backers.
In a statement shared by TLG Capital, Africa Re Group Managing Director Corneille Karekezi said the firm’s approach to mitigating downside risk through guarantees from African banks makes private credit more attractive to institutional investors across the continent.
TLG Capital says it has already invested in nearly a dozen SME transactions across nine African countries over the past year.
Notably, approximately two-thirds of the deployed capital has gone to businesses operating in United Nations Least Developed Countries and World Bank-designated conflict-affected markets, highlighting a focus beyond Africa’s more established investment destinations.
The company also reported that, on average, businesses backed through the fund have recorded a threefold increase in revenue, with two companies growing beyond the SME category into mid-market businesses.
What this means for Africa’s investment landscape
While venture capital has dominated conversations around startup funding in Africa over the past decade, private credit is increasingly emerging as another important source of growth capital.
Many SMEs across the continent have difficulties in obtaining financing, even if they have established operations and steady revenues. Traditional bank lending usually requires rigid collateral conditions while venture capital is usually directed at high growth technology start-ups.
Private credit funds such as AGIF II provide businesses with capital for expansion without requiring founders to give up ownership in the said businesses.
The BOMA model shows how collaboration between private investment firms and local financial institutions can help unlock financing for markets that have historically been seen as too risky by international investors.
AGIF II and other developments demonstrate that Africa’s private credit ecosystem is evolving with its venture capital market.
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