Unlocking SME impact funding in the horn of Africa

In a recent interview with CNBC Africa, Mahat Mohammed Ahmed, the director of Chiraco, shared valuable insights on unlocking SME impact funding in Somalia, Djibouti, and northern Kenya. Ahmed discussed the importance of aligning impact funding with local solutions, highlighting the need to prioritize such funds in African markets. He emphasized the role of SMEs as the bedrock of African economies and the significance of providing access to capital and technical assistance to address their challenges. Chiraco is currently managing a $40 million fund by the Nordic DFIs in Somalia and is looking to expand regionally to the Horn of Africa. Ahmed revealed plans for a new regional fund of $250 million in partnership with UNDP, targeting Northern Kenya, Somalia, and Djibouti. The fund is expected to go live in Q3 or Q4 of 2025, following regulatory processes in the three markets. The director highlighted the innovative financing mechanisms employed to de-risk investments in fragile markets, emphasizing sector agnosticism and the focus on key sectors like green energy and fisheries. One of the key priorities for Chiraco is reducing the cost of electricity in the region to support economic growth and sectoral development. Ahmed mentioned their pilot projects in Somalia to replace diesel generators with green energy, resulting in lower electricity costs and increased connections. The company aims to replicate these solutions in northern Kenya and Djibouti to stimulate growth in sectors like fisheries. In terms of regulatory frameworks, Ahmed discussed the evolving energy policies in Djibouti and Somalia, allowing greater access to solar energy. He emphasized the importance of legislative changes to address the high cost of electricity in these markets and enhance competitiveness on a global scale. When measuring the impact of investments, Ahmed emphasized the focus on human capital development and job creation, highlighting the multiplier effects of SME investments. Chiraco's ambitious $250 million fund signals a game-changer for SME impact funding in the Horn of Africa, with the potential to drive sustainable economic growth and create new opportunities for businesses in the region. The company's strategic approach to financing, coupled with a focus on key sectors and innovative solutions, positions it as a key player in unlocking the region's economic potential.