In Mozambique, many entrepreneurs operate across agricultural production, linking smallholder farmers to markets and transforming food products into higher value-added goods. These small and growing businesses (SGBs) occupy a central position in the modernisation of the agricultural economy. Yet many face persistent financing constraints: they are considered too large for microcredit and too small to access conventional bank lending, while frequently lacking the collateral required to attract private equity. This structural gap is commonly referred to as the 'missing middle'.
The primary obstacle is rarely a lack of entrepreneurial ambition. The real challenge is a scarcity of capital suited to the needs of these businesses — capital with terms flexible enough to accommodate agricultural cycles, support enterprises still consolidating their financial position, and absorb levels of risk that, while real, remain manageable. It is precisely this gap that FSD Africa's Early-Stage Finance (ESF) strategy seeks to address.
FSD Africa is a specialist financial development agency working to align financial systems with Africa's economic growth. Its interventions, investments, and early-stage financing solutions are concentrated in an underserved market segment, supporting high-potential enterprises that do not yet qualify for conventional financing through banks or equity investors. FSD Africa operates through market development, forming partnerships with new capital providers, supporting the creation of innovative financial instruments, and improving the way banks and investors assess and manage risk associated with these businesses.
A programme designed for Mozambique's reality
In Mozambique, this approach has taken concrete form through the RAIZ Programme — Resiliência, Adaptação e Inovação (Resilience, Adaptation and Innovation) — a UK government-funded initiative designed to stimulate the early-stage finance market for small and growing businesses across the country.
The RAIZ Programme, whose name evokes the concept of 'roots', was established to demonstrate that a viable market exists and to contribute to its expansion. By partnering with innovative capital providers, the programme tests new financing models for small and growing enterprises, helping this segment attract investment at greater scale and access more diversified financial solutions calibrated to their specific needs.
Through the RAIZ Programme, supported by the UK government, FSD Africa is testing a bold proposition: that small and growing businesses in Mozambique are financeable. The initiative aims to lay the foundations for a financing continuum capable of demonstrating this reality.
The programme is focused on agriculture and climate-resilient food systems, the blue economy, and renewable energy — sectors where these businesses can raise productivity, reduce post-harvest losses, and strengthen their capacity to adapt to climate change.
Building a capital continuum
What distinguishes the RAIZ Programme is its approach to constructing a continuous financing chain, built around four core areas: strengthening local capital providers with deep market knowledge; promoting new investment vehicles — including equity, quasi-equity, repayable seed financing, and impact-linked loans — particularly where local supply remains limited; mobilising local, regional, and international capital towards a historically neglected segment; and reinforcing the ecosystem of market information and investment readiness.
In practice, this approach is reflected in a set of partnerships encompassing a Mozambique-domiciled early-stage investment fund, an impact-linked financing vehicle, an angel investor vehicle, and a revolving innovation fund for financing. Taken together, these initiatives seek to create a progressive financing pathway — from initial business validation through angel investment and seed capital, to access to debt financing, hybrid financing, and patient capital, meaning long-term investment.
'RAIZ is not simply another business support programme. It is an effort to transform the way financing flows.'
Why does it matter?
For banks and investors, the initiative represents both a commercial and a development opportunity, given that these small and growing businesses are close to customers and supply chains, operating in sectors with growing demand. A segment long regarded as too risky and too difficult to finance is now being assessed against concrete evidence — including real transactions, repayment track records, and the performance of local institutions. For the government, the RAIZ Programme complements existing efforts by reaching early-stage enterprises that rarely benefit from conventional bank credit lines. For entrepreneurs, it represents an acknowledgement that the growth of these businesses is essential to the country's economic future.
Mozambique's next phase of economic growth may depend not only on large enterprises, but also on the thousands of small and growing businesses operating across the country. The RAIZ Programme alone will not eliminate the existing financing deficit. However, through each investment made, it seeks to demonstrate that these businesses — and the new capital providers supporting them — represent a credible investment opportunity capable of generating sustainable returns.
Source: Diário Económico
Original article: https://www.diarioeconomico.co.mz/?p=527524
