DEG Impact has announced the launch of a new partnership that aims to reshape how small and medium-sized enterprises (SMEs) in East Africa access growth capital, at a time when entrepreneurs across the continent are grappling with tighter credit conditions and cautious lenders.
In a statement, DEG Impact said it has partnered with Unconventional Capital through the AfricaGrow Technical Assistance Facility to establish a Revolving Finance Facility designed to reinvest its returns sustainably, creating lasting impact.
The initiative introduces Revenue-Based Finance (RBF) as an alternative funding model for small businesses in East Africa, a region where SMEs account for the majority of employment but remain chronically underserved by traditional finance.
“Our focus,” DEG Impact said, is to “introduce Revenue-Based Finance as an innovative solution for small businesses in East Africa”, while working closely with “Unconventional Capital’s experienced investment team based in Nairobi” to “test and refine this model” and “expand access to flexible, growth-oriented financing where traditional options are limited”.
A different answer to a familiar problem
Across Africa, founders with viable businesses often find themselves trapped between opportunity and constraint. Banks demand collateral that many entrepreneurs do not have. Loan repayments are fixed, even when revenues fluctuate. Equity investors, meanwhile, can dilute ownership early, sometimes before a business has found its footing.
DEG Impact’s announcement brings this challenge into sharp focus through a practical example: “Imagine a small agritech company in Kenya with strong demand but limited access to traditional loans. High collateral requirements and rigid repayment schedules often hold founders back.”
Revenue-based finance offers a different approach. Rather than fixed monthly repayments, “Repayments grow with the company’s revenue”, allowing founders, DEG Impact noted, “breathing room to invest in growth, hire talent and innovate without the fear of crushing debt”.
Why revenue-based finance is gaining ground
Globally, revenue-based finance has gained traction among growth-stage SMEs seeking capital that aligns with business performance. In markets such as the US and parts of Europe, RBF has emerged as a middle ground between debt and equity. In Africa, however, such models remain rare.
That is why DEG Impact describes the new facility as one of the few initiatives of its kind in the region.
The appeal lies in its structure. As DEG Impact outlined, revenue-based finance offers:
- Flexibility, because “repayments align with revenue, reducing pressure on early-stage businesses.”
- Shared risk and reward, which “foster(s) true partnership between investors and entrepreneurs.”
- Growth enablement, “allowing founders to scale without heavy fixed repayment burdens.”
For African entrepreneurs operating in volatile markets where weather shocks, currency movements and infrastructure gaps can all affect cash flow, this flexibility can be decisive.
Testing innovation from Nairobi with regional ambition
The partnership will be anchored in Nairobi, leveraging Unconventional Capital’s on-the-ground investment expertise. By testing and refining the model locally, the partners aim to build a blueprint that could be replicated across East Africa and potentially, beyond.
The revolving nature of the facility is also central to its long-term ambition. By reinvesting returns, the structure is designed to be sustainable rather than one-off, supporting successive generations of entrepreneurs.
“This is one of the few initiatives of its kind in the region, and we’re proud to be pioneering it together with Unconventional Capital,” DEG Impact said. “The facility has just launched and we’re eager to see the impact unfold.”
For Africa’s business builders, the announcement reflects a broader shift in how development finance institutions and impact investors are thinking about risk, partnership and growth. Rather than forcing entrepreneurs into rigid financial products, there is growing recognition that capital must adapt to the realities of African markets.
At a time when global capital is more selective, initiatives such as this suggest that innovation in finance, not just technology will shape the next chapter of African entrepreneurship.
And for the agritech founder in Kenya or the SME scaling across East Africa, the message is simple. Growth capital does not always have to come with strings that pull a business apart.
