Senegalese private equity firm Teranga Capital has secured a portfolio guarantee of €1.5m from Proparco, the private sector financing arm of the French Development Agency (AFD).

The deal, signed on December 4, is structured to support Teranga’s deployment of a €3m investment portfolio targeting small and medium-sized enterprises (SMEs) in Senegal. The agreement utilises the ARIZ PRIME mechanism — a risk-sharing tool used by the French development finance institution (DFI) to encourage investment in higher-risk market segments.

For Teranga, the guarantee acts as a buffer, covering a portion of the potential losses on its investments. This allows the firm to deploy capital into sectors that traditional commercial banks often avoid due to perceived risk, such as agribusiness, renewable energy, and technology services.

De-risking the “Missing Middle”

The partnership addresses a structural gap often cited in African venture capital and private equity: the “missing middle.”

In markets like Senegal, microfinance institutions cover the bottom of the pyramid (loans under €10k), and large commercial banks or pan-African PE firms look for ticket sizes well above €5m. Businesses requiring between €100k and €2m often struggle to access financing.

“The deployment of the ARIZ PRIME guarantee is proof of our commitment to reducing inequalities in access to financing,” said Sadio Dicko, Regional Director for West Africa at Proparco.

Mohamed Ngom, Deputy Director General of Teranga Capital, noted that the mechanism “improves risk coverage” for the firm’s limited partners (LPs), potentially making fundraising easier for future vehicles.

Expansion beyond Senegal

The Proparco deal follows a period of significant activity for Teranga Capital. In May 2025, the firm reached the first close of a new fund, securing CFA 2bn ($3.4m) towards a target of CFA 5–6bn.

While Teranga has spent nearly a decade focused on the Senegalese market, it is now preparing to widen its geographic mandate. The firm has signaled intentions to deploy capital in neighbouring markets that see little international deal flow, including:

• The Gambia
• Mauritania
• Guinea-Bissau
• Cape Verde

This expansion strategy targets “frontier” markets within the West African region. While Nigeria, Kenya, and Egypt dominate the continent’s VC headlines, Francophone West Africa — and particularly smaller nations like Guinea-Bissau — remain largely off the radar for global investors.

The investment thesis

Teranga Capital, a member of the Investisseurs & Partenaires (I&P) network, typically executes equity and quasi-equity investments. Following shareholder approval in March, the firm has increased its maximum ticket size to CFA 1bn (€1.5m) to accommodate larger SMEs.

The firm’s recent capital raise included backing from:

• FONSIS: Senegal’s sovereign wealth fund.
• I&P (via IPDEV2): A veteran pan-African impact investor.
• CFYE: The Dutch government’s Challenge Fund for Youth Employment.
• Private Investors: Including co-founders Olivier Furdelle and Omar Cissé.

Why this matters

• The Mechanism: Direct equity investment is risky; debt is expensive. Portfolio guarantees like ARIZ PRIME are becoming a favoured tool for DFIs to unlock local capital without deploying cash directly into companies themselves.
• The Geography: As competition for deals heats up in Lagos and Nairobi, regional funds are looking at the “corners” of the map. Teranga’s bet is that being the first institutional money in places like Bissau will offer better valuations and impact, despite the operational headaches.
• The Ticket Size: The shift to a €1.5m cap places Teranga firmly in the growth-stage bracket for the region, moving slightly upmarket from its earlier, smaller seed investments.