Enterprise Financing Facility (EFF)

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A blended finance investment facility for SMEs and startups combining direct investments and a fund-of-funds under the Innovative Finance Lab.
What are the main aims and objectives?

The Enterprise Financing Facility aims to close Ethiopia’s SME and startup financing gap by mobilizing diverse investors, de‑risking private capital, and expanding the number and capacity of local fund managers, while pairing capital with technical assistance to strengthen enterprise investment readiness and promote an enabling policy environment through the Innovative Finance Lab platform.

How does the program work?

The Enterprise Financing Facility operates within the Innovative Finance Lab (IFL), a platform created by the National Bank of Ethiopia and the United Nations Development Programme in 2022 to test and scale innovative instruments that unlock finance for MSMEs and startups in Ethiopia. Within this platform, EFF serves as the capital deployment pillar, complementing the IFL’s Technical Assistance Facility and Knowledge unit that build pipeline quality and support policy and regulatory improvements for a functioning private capital market.

EFF uses a multi-asset strategy with two core channels: a fund-of-funds pillar that commits capital to new and existing fund managers, and a direct investment window that invests in SMEs and startups, with the option to co‑invest alongside selected managers. The fund-of-funds is intended to widen and professionalize the domestic fund management pool and crowd in commercial investors over time, while the direct/co‑investment channel targets scalable firms that have outgrown microfinance but cannot access bank lending, commonly referred to as the “missing middle” in Ethiopia’s market context.

A competitive selection process appointed Kuramo Capital Management as the EFF general partner and fund manager, with local general partners from Kazana Fund to strengthen sourcing, due diligence, and portfolio support in Ethiopia. Kuramo’s mandate includes finalizing fund setup and pursuing first close, leveraging experience anchoring 15+ African PE funds that collectively raised over $3 billion and managing nearly $500 million across six vehicles, to mobilize investors into EFF’s blended structure. The IFL’s Technical Assistance Facility provides pre‑ and post‑investment support to enterprises—including small grants and readiness programming documented in early cohorts—to prepare companies for investment, while the Knowledge unit engages on policy and regulatory topics such as capital market development and sandboxes with the Ethiopian Capital Market Authority.

What is the overall cost?

EFF is worth $100 million in total.

How was it implemented?

The Innovative Finance Lab was established in 2022 by the National Bank of Ethiopia in partnership with UNDP to catalyze access to finance for MSMEs through a portfolio of instruments and market-building activities; the Enterprise Financing Facility was designed as the flagship investment vehicle within this architecture. In 2024, IFL/UNDP ran a competitive process to select a professional fund manager for EFF; Kuramo Capital was appointed as general partner to establish, structure, and manage the blended facility, with Addis Alemayehu and Hilina Resom from Kazana Fund onboarded as local general partners.

Implementation has proceeded along two tracks: fund setup and ecosystem preparation. On fund setup, Kuramo is tasked with finalizing the vehicle, aligning governance, and securing first close in 2025, while building the investment pipeline and LP base for the fund-of-funds and direct/co‑investment strategy. On ecosystem preparation, the IFL has delivered technical assistance cohorts and small investment-readiness grants to early enterprise cohorts, positioning companies to qualify for investment once the EFF becomes operational; communications indicate the IFL’s advisory and knowledge functions also coordinate with regulators such as the Ethiopian Capital Market Authority and support enabling initiatives around the upcoming Ethiopian Securities Exchange.

What impact has been measured?

Documented results to date relate to institutional setup and market-building rather than deployed capital, as the facility is in fundraising and establishment: IFL creation at the central bank with UNDP (2022), EFF’s design as a blended vehicle with FoF and direct channels, and appointment of Kuramo Capital with local GPs to operationalize the structure. The IFL has run technical assistance cohorts and deployed small readiness grants (e.g., $150,000 across 30 enterprises) to strengthen pipeline quality before EFF deployment; these activities indicate demand preparation though they are not EFF investments per se. Media coverage highlights expectations that, once operational, the facility and broader IFL initiatives could inject capital into roughly 150 SMEs, but no EFF portfolio transactions or performance metrics have been published to date; formal impact reporting remains unavailable publicly.

What lessons can be learned?
  • The program is still pre‑deployment: no public record of EFF investments, committed LP roster, or sub‑fund selections, which limits assessment of crowd‑in and portfolio performance at this stage.
  • Media commentary underscores structural challenges such as the “missing middle,” bank credit constraints, and the need for strong regulatory execution by the Ethiopian Capital Market Authority as the Ethiopian Securities Exchange comes online; EFF’s success will depend on these external enablers.
  • IFL delivered small investment-readiness grants and TA early; sustaining pipeline quality will require sustained TA, governance strengthening, and post‑investment support to translate into bankable deals for EFF at scale.
  • The FoF pillar aims to expand local fund managers; market absorption may hinge on the pace of manager licensing, fund registration under emerging capital market rules, and tax/regulatory clarity for private capital vehicles in Ethiopia.

CURATED BY

Tom Hancock

Research Associate
Global Entrepreneurship Network
United Kingdom