Sterling Bank and Cascador have unveiled a $200m SME Credit Backstop Fund aimed at expanding access to growth capital for Nigerian small and medium-sized enterprises, using a risk-sharing model designed to support up to $1bn in outstanding loans.
Announced on Wednesday in Lagos, the initiative is designed to help businesses with established operations and proven commercial traction secure larger, longer-term loans, addressing financing constraints that have limited their ability to expand, invest in productive assets, and create jobs.
The fund will provide a defined credit-risk backstop to participating finance partners, offering additional protection against potential losses and encouraging lenders to extend credit to businesses that might otherwise struggle to obtain suitable financing.
The $200m represents the announced backstop fund size, while the $1bn figure is the credit capacity the model is designed to support. The initiative is intended to mobilise lending through participating financial institutions rather than operate as a direct lending scheme.
The launch comes against the backdrop of a persistent financing gap for African businesses, many of which rely heavily on equity because suitable debt financing remains difficult to obtain. The fund seeks to address that imbalance by creating a structured route from early-stage investment and business support to commercial borrowing.
According to Cascador’s white paper, The Multiplier Model, only 22 per cent of businesses in Sub-Saharan Africa have bank loans or lines of credit, compared with a global average of 36 per cent.
The report examines the constraints limiting African businesses’ ability to scale and argues for matching capital to the needs and maturity of individual enterprises. The disparity in access to credit reflects the limited availability of debt as a suitable source of growth capital, leaving businesses to finance a greater share of investment through equity than the global norm.
Chief Executive Officer of Cascador, Trish Thomas, said Nigeria had significant entrepreneurial talent and innovation but that businesses’ potential remained constrained by the lack of capital suited to their development and ambitions.
“Nigeria is rich in entrepreneurial talent and innovation, and yet their potential is constrained by lack of access to capital that matches where they are and what they are trying to achieve,” Thomas said in a statement.
She said the fund was intended to provide businesses with proven traction a practical route to debt by combining the experience and capital of different participants in the business ecosystem.
“The SME Credit Backstop Fund aims to transform potential into a reality by bringing the experience and capital of the ecosystem to create a practical route to debt for Nigerian businesses with proven traction,” she noted.
“By sharing risk with lenders and translating community trust into a bankable signal to lend, the fund can help more businesses access what they need to scale and create jobs.”
Cascador brings experience in identifying, supporting and investing in businesses with the potential to scale, while Sterling Bank contributes lending infrastructure and credit-market expertise.
The initiative will also bring together SME ecosystem partners, finance partners and providers of backstop capital, including philanthropic funders, impact investors and development finance institutions. These participants are expected to contribute to a common risk-sharing framework that supports the guarantee reserve and helps mobilise additional lending to SMEs.
Group Executive of Sterling Bank, Obinna Ukachukwu, said the partnership addressed lending risk at different stages of the financing process by combining additional credit protection with a pipeline of businesses recommended by venture funds and studios familiar with their development.
“At Sterling, the strength of this partnership lies in how it addresses lending risk across the entire financing journey,” Ukachukwu noted.
“Alongside the additional protection of the credit backstop, the initiative brings together businesses recommended by participating venture funds and studios that know these enterprises and have supported their development.
“This combines a stronger borrower pipeline with structured assessment and ongoing monitoring, giving us greater confidence to provide larger, longer-term loans. As a lending partner, we see the potential for this arrangement to bolster SME lending, helping proven businesses access the capital they need to scale.”