(Ecofin Agency) - With these first issuances, Cameroon and Côte d’Ivoire are pioneering the introduction of this innovative financial mechanism. According to FinAfrique Partners, this model could be replicated in other African countries to support the informal sector and promote sustainable economic growth.

Cameroon and Côte d’Ivoire are preparing to roll out a groundbreaking financing tool called inclusive bonds. These bonds aim to help very small businesses (VSBs) that often struggle to get traditional financing. The initiative is set to begin this year and is being led by FinAfrique Partners, under the leadership of Cameroonian financier Fabrice Kom Tchuente. The focus is on supporting sectors like cross-border trade and small-scale artisanal production.

Inclusive bonds use a creative approach to funding. They rely on a hybrid guarantee system that reduces risks for investors and lowers borrowing costs for small businesses. A group of backers, including governments and international guarantee funds, covers 70% of the financial risks. The remaining 30% comes from the beneficiaries, who provide guarantees through the issuers.

Once the bonds are sold in the capital markets, the money goes directly to small businesses identified by local organizations. These organizations earn a fee for helping distribute the loans and monitoring repayments. The loans last at least 24 months and come with interest rates that are half the usual rates for informal businesses, making them more affordable for small entrepreneurs.

In Cameroon, the first inclusive bond will be issued by ACEP Cameroun, a microfinance institution that is part of the ACEP International network. Société Générale Capital Securities Central Africa will act as the arranger. The bond aims to raise CFA10 billion (about $15.7 million) to fund 1,000 small businesses. Each business is expected to receive an average loan of CFA10 million.

The bond will target businesses involved in cross-border trade and artisanal production. These sectors were selected with the help of Cameroon’s Ministry of Commerce. The funding will help these businesses expand their operations in an environment where access to financing is often limited.

Côte d’Ivoire is also preparing to issue its own inclusive bonds. Credit Access and Witti Finances, two respected microfinance institutions, will lead the effort, with Ecobank Development Corporation (EDC) serving as the arranger. The goal is the same: to raise CFA10 billion and fund 1,000 small businesses.

In Côte d’Ivoire, the focus will be on businesses identified with support from the Ministries of Commerce and Agriculture. The loans will target promising sectors across the country, giving entrepreneurs the resources they need to grow and thrive.