In a significant boost for Zambia’s burgeoning private sector, a powerful consortium comprising British International Investment (BII), Zambia’s National Pension Scheme Authority (NAPSA), and Swedfund today officially announced the launch of Growth Investment Partners Zambia (GIP Zambia). This innovative investment company is poised to become a cornerstone of long-term economic development, specifically designed to inject flexible capital, primarily in local currency, into the nation’s vital small and medium-sized enterprises (SMEs).

GIP Zambia has successfully secured an initial fundraising close of an impressive $70 million. This foundational capital includes a substantial anchor commitment of $37.5 million from BII, complemented by $17.5 million from NAPSA, and $15 million from Swedfund. This strategic collaboration aims to directly confront and alleviate the persistent financing gap that has historically stifled the growth and potential of Zambia’s dynamic SME sector.

Over the next 15 years, GIP Zambia is projected to deploy more than $300 million to approximately 150 SMEs, a scale of investment that promises to be transformative. The platform will strategically prioritize investments in key sectors identified as primary drivers of inclusive economic growth, including manufacturing, agriculture, and financial services. This targeted approach is designed to maximize impact, foster job creation, and build a more resilient and diversified Zambian economy.

Bridging the Critical SME Financing Gap in Zambia

Small and Medium-sized Enterprises are universally recognized as the engine rooms of economic growth, innovation, and job creation, particularly in developing economies. In Zambia, their significance cannot be overstated. According to the SME Development Minister, Elias Mubanga, SMEs constitute an overwhelming 97% of all businesses in the country and contribute a substantial 70% to Zambia’s Gross Domestic Product (GDP). Furthermore, they are responsible for employing a significant portion of the working population, estimated by some sources to be around 88% of the workforce.

Despite their pivotal role, Zambian SMEs have long grappled with a severe lack of access to appropriate and affordable finance. The International Finance Corporation (IFC) estimated the MSME (Micro, Small, and Medium Enterprises) financing gap in Zambia to be a staggering $3.6 billion even before the COVID-19 pandemic, a situation that has only been exacerbated by subsequent economic challenges. This gap is not merely about the quantity of capital but also its quality. Traditional financial institutions often offer short-term loans with high interest rates and stringent collateral requirements, which are ill-suited for the long-term investment cycles and growth needs of many SMEs.

The challenges faced by Zambian SMEs extend beyond just finance. They also include:

• Lack of adequate collateral: Many small businesses lack the tangible assets required by commercial banks.
• High interest rates: Commercial lending rates can be prohibitive, making expansion difficult.
• Short-term loan structures: Mismatches between loan tenors and investment horizons.
• Limited financial literacy and business management skills: Affecting their ability to prepare robust business plans and manage finances effectively.
• Burdensome regulatory requirements: Leading to high compliance costs and complexities.
• Information asymmetry: Difficulty for lenders to assess the true risk and potential of informal or less-structured SMEs.

GIP Zambia’s mandate directly addresses these systemic issues by offering “long-term, flexible capital, primarily in local currency.” This approach is a game-changer, mitigating foreign exchange risks for businesses whose revenues are primarily in Zambian Kwacha and allowing for more predictable debt servicing.

The Visionaries Behind GIP Zambia: A Collaborative Development Model

The establishment of GIP Zambia is a testament to a shared vision among its founding partners to foster sustainable development through private sector growth.

British International Investment (BII): A Catalyst for African Development

Leslie Maasdorp, CEO of BII, articulated the institution’s strategic intent: “Zambia’s SME sector holds immense potential to drive inclusive growth and create jobs, but the right kind of capital remains elusive for many businesses. GIP Zambia builds on our experience of launching GIP Ghana and reflects our long-term commitment to building local financing ecosystems that work for SMEs and entrepreneurs. We believe this is how catalytic development finance should operate – working with domestic partners to mobilise capital, support entrepreneurs, and deliver real economic transformation.”

BII, the UK’s development finance institution and impact investor, has a rich history of investing in Africa for over 75 years. Its core mandate is to create productive, sustainable, and inclusive economies in its markets across Africa, Asia, and the Caribbean. BII’s strategy emphasizes mobilizing private capital alongside its own investments, aiming for every $1 of BII investment to catalyze $4 to $5 from commercial sources. This catalytic approach is evident in the GIP Zambia model, where BII’s anchor commitment aims to attract further domestic and international co-investment over time.

BII’s investment priorities in Africa include:

• Climate Finance: With a target of at least 30% of new commitments in climate finance between 2022-2026, BII is a significant player in the continent’s green transition.
• Energy Access: Addressing the energy deficit, particularly in electrifying the approximately 600 million Africans currently without power.
• Infrastructure: Supporting foundational infrastructure that connects people and markets.
• Digital Access and Inclusion: Enhancing connectivity and digital literacy.
• Agriculture: Boosting food security and rural livelihoods.

The GIP model, as exemplified by GIP Ghana and now GIP Zambia, aligns perfectly with BII’s objective of deepening its focus on “frontier markets” – countries that may not have a long track record of large multinational investments but possess significant growth potential. By investing in local financing ecosystems, BII helps de-risk these markets and paves the way for broader private sector participation.

National Pension Scheme Authority (NAPSA): Investing in Zambia’s Future

Shipango Muteto, Chairperson of the NAPSA Board of Trustees, highlighted the domestic significance of this partnership: “The launch of GIP Zambia marks a significant milestone for NAPSA. This strategic partnership with BII and Swedfund allows us to channel much-needed patient capital into Zambia’s SMEs — the very backbone of our economy. We are confident that by supporting the growth of these local businesses, we will catalyse job creation and stimulate broader economic activity. For NAPSA, this is not just an investment; it is an imperative that directly contributes to growing our membership base, thereby strengthening the long-term sustainability of the pension fund and securing the future of our members.”

NAPSA is Zambia’s national social security provider, responsible for managing pension contributions and ensuring the long-term financial security of its members. Its investment philosophy prioritizes capital preservation, security of assets, and maximization of returns consistent with acceptable risk levels and liquidity considerations. By investing in GIP Zambia, NAPSA is fulfilling its mandate to diversify its portfolio while also making a direct, impactful contribution to the Zambian economy. This investment aligns with NAPSA’s broader strategy to support viable socially and economically targeted investments, recognizing that a thriving SME sector leads to more formal employment, increased contributions, and ultimately, a stronger pension fund for its members. It’s a win-win: generating returns for pensioners while simultaneously fostering national development.

Swedfund: Championing Sustainable Development through Local Solutions

Marie Aglert, Chief Investment Officer at Swedfund, emphasized the Swedish development financier’s commitment: “Access to long-term financing is essential for SMEs to grow their businesses in Zambia and beyond. Through our investment in GIP Zambia, Swedfund sees an opportunity to provide local currency financing tailored to the needs of Zambian SMEs. This investment aligns with Swedfund’s strategy to expand our presence in Zambia and across Southern Africa.”

Swedfund is a Swedish state-owned development finance institution whose mandate is to reduce poverty by investing in sustainable businesses in developing countries. It focuses on three main pillars: sustainable business, impact on society, and economic viability. Swedfund often invests through funds and financial institutions, making it a natural partner for GIP Zambia. Their particular emphasis on local currency financing is crucial, as it helps businesses avoid the volatility and risks associated with borrowing in foreign currencies, especially in markets prone to exchange rate fluctuations. Swedfund’s participation underscores a global recognition of the need for tailored financial instruments in emerging markets.

A Tailored Approach: The Power of Local Currency and Flexible Capital

The emphasis on “long-term, flexible capital, primarily in local currency” is a defining feature of GIP Zambia and a critical innovation in development finance.

Benefits of Local Currency Lending:

• Mitigates Currency Risk: For Zambian SMEs whose revenues are primarily in Zambian Kwacha, borrowing in local currency eliminates the risk of their debt burden increasing unexpectedly due to Kwacha depreciation against foreign currencies (like the US Dollar). This provides financial stability and predictability.
• Predictable Debt Servicing: Businesses can plan their repayments with greater certainty, as their income and debt obligations are in the same currency. This reduces the likelihood of financial distress or bankruptcy caused by currency mismatches.
• Supports Local Capital Markets: By promoting local currency transactions, GIP Zambia indirectly contributes to the deepening and strengthening of Zambia’s domestic financial markets. This can lead to greater financial resilience against macroeconomic shocks.
• Longer Tenors: Local currency funding can often facilitate longer loan tenors, which are essential for investments in productive assets, infrastructure, or agricultural cycles that have longer gestation periods.
• Alignment with Business Cycles: Local currency financing better aligns with the operational and revenue cycles of local businesses, fostering more sustainable growth.

Flexible Capital: This implies that GIP Zambia will offer a range of financial instruments beyond traditional bank loans, such as equity, quasi-equity, or tailored debt solutions. This flexibility allows the fund to structure investments that best suit the specific needs and growth stages of individual SMEs, rather than forcing them into a rigid financial mold.

Targeting Growth: Key Sectors for Transformative Impact

GIP Zambia’s strategic focus on manufacturing, agriculture, and financial services is deliberate, reflecting their potential for significant economic and social impact in Zambia.

Manufacturing:

Zambia has a strong imperative to diversify its economy beyond copper mining. A robust manufacturing sector is crucial for value addition, job creation, and reducing reliance on imports. Investments in manufacturing SMEs can lead to:

• Import Substitution: Producing goods locally that were previously imported, saving foreign exchange and building domestic industrial capacity.
• Job Creation: Manufacturing is labor-intensive, offering employment opportunities across various skill levels.
• Backward and Forward Linkages: Creating demand for local raw materials (e.g., agricultural produce for agro-processing) and supplying inputs to other industries.
• Technological Transfer: Encouraging the adoption of modern production techniques and improving overall productivity.

Agriculture:

Agriculture is the backbone of Zambia’s rural economy, employing a large percentage of the population and contributing significantly to food security. Investments in this sector can:

• Enhance Food Security: Increasing local food production and reducing reliance on imports.
• Rural Development: Creating jobs and income opportunities in rural areas, stemming rural-urban migration.
• Value Chain Development: Supporting agro-processing, storage, and distribution, moving beyond primary production to higher-value activities.
• Climate Resilience: Funding for sustainable farming practices and climate-smart agriculture.

Financial Services:

A well-functioning financial sector is crucial for channeling capital to productive uses across the entire economy. Investments in financial services SMEs can:

• Promote Financial Inclusion: Supporting microfinance institutions, fintech companies, and other entities that extend financial services to underserved populations and small businesses.
• Strengthen the Financial Ecosystem: Enhancing the capacity of local financial intermediaries to better serve SMEs.
• Innovation in Financial Products: Encouraging the development of new and tailored financial solutions for specific business needs.

Lessons from Precedent: The GIP Ghana Model

The mention of GIP Ghana by BII’s CEO Leslie Maasdorp is significant. Launched in 2023, Growth Investment Partners Ghana was BII’s first-of-its-kind platform designed to provide long-term, flexible, local currency capital to Ghanaian SMEs. GIP Ghana received an anchor capital commitment of up to $50 million from BII. Its initial investments have included supporting a Business Process Outsourcing (BPO) company, eSAL, to expand and create jobs, and backing a micro-credit firm, Fido, to boost financial inclusion.

The success and learnings from GIP Ghana likely informed the structure and operational model of GIP Zambia. This replication of a proven model demonstrates BII’s commitment to scaling effective development finance solutions across the continent. It suggests that the GIP framework is adaptable and capable of addressing similar financing challenges in different African markets, leveraging local partnerships for maximum impact.

Zambia’s Economic Landscape: A Fertile Ground for Investment

Zambia’s economic outlook, while facing challenges, presents a promising environment for initiatives like GIP Zambia. The country has demonstrated resilience, with the IMF reaffirming a 2025 growth projection of 6.6%. Preliminary GDP growth in Q4 2024 was a robust 8.6%, indicating a strong recovery. Moody’s recent upgrade of Zambia’s economic outlook from “stable” to “positive” further underscores growing international confidence.

The Zambian government has explicitly prioritized SME development, recognizing their catalytic role in economic growth. Policies are being shaped to address structural weaknesses and enhance the business environment. Key areas of focus for the government include:

• Industrial Policy Revamp: Enhancing value addition, particularly in mining, agriculture, agro-processing, energy, and ICT.
• Streamlining Tax and Customs Procedures: Reducing transaction costs and improving competitiveness, especially for SMEs under the African Continental Free Trade Area (AfCFTA).
• Green Growth Strategies: Integrating climate-resilient practices and promoting renewable energy.
• Digital Inclusion and Human Capital Development: Investing in ICT infrastructure and aligning education with industry needs.
• Attracting Strategic Foreign Direct Investment (FDI): Targeting high-value sectors and technology partnerships.

GIP Zambia’s focus aligns perfectly with these national priorities, ensuring that its investments contribute synergistically to the country’s broader development agenda.

Looking Ahead: Expected Impact and Future Trajectory

Musonda Chipalo, CEO of GIP Zambia, encapsulated the local perspective: “Zambian entrepreneurs are full of drive and creativity, but too many face the same obstacle: a lack of appropriate, long-term finance to grow their businesses sustainably. GIP Zambia is here to change that by providing long-term, flexible capital in local currency, designed around the real needs of local businesses. By mobilising domestic capital and working with international partners, we are driving inclusive growth and creating a stronger economy that truly works for Zambians.”

The expected impact of GIP Zambia extends far beyond the direct financial injection:

• Job Creation: Direct and indirect employment opportunities as SMEs expand.
• Economic Diversification: Reducing reliance on single commodities and fostering new industries.
• Increased Productivity and Competitiveness: Through access to capital for technology upgrades, training, and market expansion.
• Formalization of Businesses: Encouraging informal businesses to formalize, leading to increased tax revenues and better worker protections.
• Enhanced Financial Inclusion: Expanding access to finance for previously underserved entrepreneurs, including women and youth.
• Sustainable Development: Promoting environmentally sound business practices and social responsibility.

While the outlook is overwhelmingly positive, GIP Zambia will need to navigate potential challenges such as global economic volatility, continued inflationary pressures, and ensuring robust governance and capacity within the SMEs it supports. However, with the combined expertise and commitment of BII, NAPSA, and Swedfund, GIP Zambia is exceptionally well-positioned to become a transformative force in Zambia’s economic landscape. Its success will serve as a powerful model for how strategic partnerships and tailored financial solutions can unlock the immense potential of SMEs in emerging markets, driving inclusive and sustainable growth for years to come.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

16th July, 2025