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By Kayode Akindele, Funsho Allu and Fred Binka: partners of 46 Parallels LLP, an investment management business based in London and Lagos.

The current focus on supplying finance to the microfinance/SME sector is admirable, but orphans a swathe of important companies across Sub Saharan Africa (SSA). These African enterprises, termed “graduating SMEs”, have outgrown the SME lenders(loans up to $5m) but have financing needs below $20m. At these quanta, their requirements exceed the scope of SME loans but are too small to be on the radar of larger local/international banks and African Private Equity funds. They tend to settle for expensive local debt facilities. These businesses are in need of flexible growth capital on their terms.

Equity Capital: Graduating SMEs have a significant role to play in driving employment and growth in the region. They would benefit from 10 year “patient capital” from Private Equity, as it often comes with operational support toformalise financial accounting, improve corporate governance and give access to global partners who help develop businesses. African private equity firms have recently raised sizeable capital to invest in the continent, with a number of marquee transactions. But as the private equity funds have gotten bigger their average transaction size has increased, leaving the ‘graduating SMEs’ behind.

Debt Capital: With recent interest rate lifts of 300bps in Nigeria, 400bps in Uganda and an unprecedented 400 bps in Kenya, SS......................

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