XSML Capital, a long-standing provider of growth capital to small and medium-sized enterprises (SMEs) in Central and Eastern Africa, has successfully closed its fourth investment vehicle, the African Rivers Fund IV (ARF IV), at US$142 million, exceeding its planned hard cap of US$135 million.
The milestone comes at a time when fundraising for emerging and frontier markets remains challenging. The fund underscores sustained investor confidence in XSML Capital’s private credit model and hands-on approach to nurturing African businesses.
The fund, which follows the full deployment of African Rivers Fund III, is designed to support SMEs operating in the often-overlooked “missing middle”, businesses considered too large for microfinance but too small or risky for conventional bank lending.
According to XSML Capital, the oversubscription reflects growing recognition that flexible, long-term financing combined with operational support can unlock sustainable growth for local enterprises while delivering value to investors.
What XSML Capital Is and What It Does
Founded in 2008, XSML Capital was established with a clear mission, to help talented entrepreneurs in Africa’s frontier markets grow their businesses into sustainable medium- and large-scale companies.
The firm focuses primarily on Central and East Africa, regions where access to appropriate business financing remains limited.
Unlike traditional lenders, XSML Capital provides more than capital. Its model blends bespoke financing, deep sector expertise, and access to a broad professional network, all aimed at nurturing local talent and fostering long-term economic resilience.
As the firm explains, its approach is “geared to nurture local talent, and bring durable prosperity in underserved markets in Central and East Africa.”
Over the years, XSML’s African Rivers Funds have built a reputation for supporting businesses with strong fundamentals that are constrained not by ideas or demand, but by lack of suitable financing options.
The Hard Cap: US$135 Million Targeted, US$142 Million Raised, and Why It Matters
African Rivers Fund IV was originally structured with a hard cap of US$135 million, representing the maximum amount the fund intended to raise. However, strong investor interest pushed total commitments to US$142 million, surpassing that ceiling.
This outcome is particularly significant given the current global investment climate, where capital flows into emerging markets have tightened.
Commenting on the achievement, Barthout van Slingelandt, Managing Partner of XSML Capital, noted that “exceeding our target-size and hard cap for Fund IV in a challenging fundraising environment demonstrates that investors support our approach to investing in SMEs.”
The oversubscription speaks confidence not only in XSML Capital as a fund manager, but also in the broader investment thesis that African SMEs, when properly financed and supported, can deliver stable growth and long-term value.
Who the Investors Are and Who Will Benefit from the Fund
Since its first close in March, ARF IV has attracted a diverse group of institutional and private investors. The fund welcomed three additional Development Finance Institutions (DFIs), including one new DFI investor, as well as two German family offices, further strengthening its investor base.
These investors are typically long-term oriented, with mandates that combine financial returns and developmental impact.
Their capital will be channeled toward promising SMEs in Central and East Africa that fall within the “missing middle”, enterprises that are commercially viable but underserved by banks and other financial institutions.
XSML Capital’s strategy focuses on private credit, offering loans rather than equity. This structure allows entrepreneurs to grow their businesses without giving up ownership, a key concern for many founders.
As van Slingelandt explained, “private credit, in combination with hands-on business support, is often a great fit for local SMEs,” because it provides “the long-term, flexible funding needed to finance their expansion.”
Why This Fund Matters for Africa’s SME Ecosystem
The successful close of ARF IV highlights a critical reality across Africa, SMEs remain the backbone of economic growth and job creation, yet they continue to face severe financing gaps.
Many banks are unable or unwilling to lend to this segment due to perceived risks, short loan tenors, or stringent collateral requirements.
XSML Capital’s model directly addresses this challenge by pairing patient capital with active business support. Beyond funding, the firm works closely with entrepreneurs to strengthen governance, improve operations, and position their businesses for sustainable growth.
Investors, in turn, value what XSML describes as its ability to provide “practical support beyond capital” while also offering “liquidity earlier in the investment cycle, which remains scarce in African markets.”
Overall, the fund’s success reinforces the growing recognition that Africa’s development challenges cannot be solved by grants or microfinance alone.
Well-structured private capital, tailored to local realities, is increasingly seen as a powerful tool for building resilient businesses, strengthening local economies, and creating durable prosperity across the continent.
Talking Points
XSML Capital’s ability to raise US$142 million above its hard cap in a tight global fundraising climate is a strong signal of sustained investor confidence in private credit as a viable tool for SME development in Africa, particularly in underserved Central and East African markets.
Beyond the headline figure, the significance of ARF IV lies in its clear focus on the “missing middle,” a segment long constrained by bank aversion to risk and short-term lending structures that do not match SME growth cycles.
By prioritising debt financing over equity, XSML addresses a major concern for local entrepreneurs, retaining ownership, while pairing capital with hands-on operational support that many financial institutions fail to provide.
However, the model’s success will ultimately be measured not by the size of the fund, but by how effectively it balances impact with financial sustainability in volatile markets where currency risk, regulatory uncertainty, and liquidity constraints remain persistent challenges.
If deployed prudently, ARF IV could strengthen the case for scalable private credit solutions in Africa; if not, it risks reinforcing scepticism about whether institutional capital can consistently deliver both returns and development outcomes in frontier economies.
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