Africa's micro, small and medium-sized enterprises MSMEs form the backbone of the continent's economies, accounting for nearly 80 of formal employment in emerging markets. Yet despite their importance, they continue to face a staggering 940 billion financing gap. One of the main obstacles lies in the fact that most Africa-focused investment funds are domiciled outside the continent, restricting the flow of capital available to African businesses.
A recent report, Study on Africa as a Jurisdiction for Domiciliation of Investment Vehicles , argues that shifting fund domiciliation back to Africa could be transformative. Doing so would unlock domestic pools of capital, such as pension funds, attract greater international investment, and strengthen financial ecosystems that support entrepreneurship and job creation for the continent's youthful population.
Domiciling funds locally has multiple benefits. It reduces operating costs, increases trust, and deepens local capital markets. It also promotes the formalisation of MSMEs, since funds typically require investee businesses to be legally registered. Moreover, by keeping funds on the continent, domestic institutions such as pension funds can deploy capital in ways that reflect local realities and priorities.