Private Credit Opportunities
in East Africa: A Structured Approach

Export-Oriented SMEs

Hard currency receivables can provide a natural anchor for structured credit, particularly in mid-sized export businesses with repeat offshore buyers in sectors such as agriculture and light manufacturing. Key features may include:

• Repeat purchase orders from established international buyers
• Short cash conversion cycles (often 30–90 days)
• Increasing standardization of documentation and payment channels

Structuring Approach:

1. Direct lending option with equity kickers: A borrowing base facility linked to eligible receivables, advance rates calibrated to counterparty strength (e.g., offshore buyers vs regional), and warrants or performance-linked participation tied to export volume growth or margin expansion. In addition, there can be potential step-up economics as scale and diversification improve.
2. Equity layering option: Assigned receivables to offshore SPV/JV structure with fund equity participation.

Both options:

• Offshore collection accounts (where feasible), with controlled cash flow waterfalls
• Dynamic monitoring of receivables ageing and dilution

Enhancing Credit Protection:

• Concentration limits by buyer
• Eligibility criteria tied to payment history and jurisdiction
• Partial credit enhancement through insurance or guarantees

Why This is Attractive:

This segment offers short-duration, hard currency cash flows with strong visibility, but limited competition from appropriately structured capital, creating an opportunity for private credit to deliver both downside protection and enhanced yield.

Aggregation Platforms (Embedded Receivables)

Platforms operating in sectors such as agribusiness and logistics increasingly sit at the center of fragmented supply chains, aggregating both production and receivables. While underlying SMEs are individually difficult to underwrite, platforms often have strong data visibility and control over receivables flows that are not fully leveraged by traditional lenders. Participation is at the platform level, effectively underwriting both cash flows and network effects.

Structuring Approach:

1. Direct lending option: Platform-level facilities secured against aggregated receivables, with dynamic borrowing bases and cash flow controls.
2. Equity layering option: Receivables can be assigned to a local JV with an offshore SPV in ‘pro-lender’ jurisdiction.  Fund entry sits at the SPV level to mitigate FX volatility and currency control risks.

Rationale:
The concentration of receivables transforms fragmented risk into something structurally financeable.

Contracted, Asset-Light Businesses (Synthetic Collateral via Receivables)

Businesses in healthcare, education, and light logistics often generate predictable revenues through contracts with insurers, corporates, or institutional payers. These businesses lack hard assets, but have securitizable moveable assets and exhibit stable and visible cash flows that may not be fully monetized.

Structuring Approach:

1. Direct Lending: Contract-backed lending with assignment of receivables, escrow arrangements, and selective step-in rights. Securitization of the moveable security such as vehicles, machinery, and other and equipment. Convertible structures or revenue-linked participation.
2. Equity Layering: moveable assets and receivables assignment to local JV owned by offshore SPV. Fund enters at offshore SPV level. 

Rationale:
This creates an opportunity to effectively “manufacture collateral” from contractual cash flows, supplemented by movable asset security. An offshore SPV structure can also help limit exposure to FX volatility risk.

Large-Cap Structured Situations

In more complex and systemically important corporates in frontier markets, the opportunity often lies in isolating and financing specific cash flow streams within a broader restructuring context. This can help preserve operational integrity while providing liquidity for exits beyond the hard assets.

Ringfence financeable assets and silos may include:

• Cargo and freight revenues (often dollar-linked)
• Ticket receivables (including offshore flows, where structurable)
• Loyalty program revenues (forward-sold, partnership-driven cash flows)

Structuring Approach:

1. Direct Lending option: Senior secured facilities can be backed by ring-fenced receivables and other assets, and may potentially be combined with mezzanine tranches and equity-linked instruments (e.g., warrants or contingent participation). If a borrower is significantly distressed, there may also be an opportunity to buy out existing debt in order to avoid recovery from stressed local lenders
2. Equity Layering option: Financeable silos can be assigned to an offshore SPV through a JV structure, particularly where political exposure is a concern or the borrower is distressed.

Rationale:

Disaggregating risk can enable private credit to participate in otherwise complex balance sheet situations, with downside protection anchored in identifiable cash flows.

Infrastructure & Digital Assets (Telecoms, Energy, Data)

Opportunity:

Across telecoms, distributed energy, and digital infrastructure, there is a consistent opportunity to finance contracted or quasi-contracted cash flows, particularly in the build-out phase where traditional project finance is not yet accessible. This includes:

• Fiber and tower platforms with anchor tenancy
• Commercial & industrial energy solutions with PPA-backed revenues
• Data infrastructure arrangements supported by anchor tenants, particularly locally established multinationals such as Microsoft or Uber, and enhanced by protections such as take-or-pay provisions or minimum volume commitments

Structuring Approach:

1. Direct Lending: Contract-backed facilities with phased drawdowns, receivables assignment, and cash flow waterfalls, often supported by reserve accounts. Warrants or performance-linked participation tied to utilization and expansion.
2. Equity Layering: Back-leveraging through JVs and SPVs, particularly with investment grade borrowers, providing the option for equity yield enhancements through the raising of investment grade notes

Rationale:
Ability to underwrite partially visible but contractually grounded cash flows creates a distinct entry point for private credit.