UNDP, UNCDF, DBSA and African Bank launch Township Spark to ignite inclusive growth in South Africa’s township economies
15 December 2025
The United Nations Development Programme (UNDP) in South Africa, the United Nations Capital Development Fund (UNCDF), and partners including the Development Bank of Southern Africa (DBSA) and African Bank have officially launched Township Spark, a new blended-finance guarantee facility aimed at expanding access to finance for township-based micro, small and medium-sized enterprises (MSMEs), especially youth- and women-led businesses. Launched on the margins of the G20 Social Summit during South Africa’s G20 Presidency, the initiative aligns with national priorities around inclusive growth and financial inclusion.
Township Spark is structured as a syndicated “club” guarantee facility that blends and leverages the de-risking capabilities of public development finance partners to catalyse commercial capital flows into underserved township markets. The facility is designed to tackle persistent financial exclusion by supporting agile lending solutions, piloting alternative credit metrics that go beyond traditional collateral, and generating actionable market data to inform scale-up in South Africa and replication across the African continent.
South Africa’s township economy is estimated at around R1 trillion a year and supports millions of livelihoods through small-scale trading, services and manufacturing, yet nearly 80% of township businesses remain informal and disconnected from mainstream finance. This disconnect limits their ability to start, grow or formalise operations, underscoring the need for catalytic interventions that open access to affordable capital and integrate township entrepreneurs into the wider economy.
UNDP South Africa Deputy Resident Representative Dr Gloria Kiondo highlighted the importance of coordinated action, noting that Township Spark demonstrates what is possible when UN agencies work with government, financial institutions and development partners to bridge public and private capital where it is most needed. By using guarantees to de-risk lending and crowd in domestic finance, the facility aims to turn township MSMEs into bankable and investable actors within the national financial system.
UNCDF Chief Investment Officer Srilata Kamilla described Township Spark as a prototype for a “post-Sevilla” development finance agenda, illustrating how innovation, blended finance and partnership can unlock growth in early-stage and last-mile markets. Pooling development finance from international and domestic partners into a syndicated guarantee facility, and leveraging a domestic bank to mobilise private capital, provides township entrepreneurs with access to catalytic, affordable finance rather than relying solely on grants or advisory support.
From the development finance perspective, DBSA’s Head of Social, Health & Education, Palesa Ryan, welcomed the introduction of smarter, evidence-based lending tools that reflect the real credit risk of township enterprises. By blending guarantees to reduce perceived risk and lower the cost of borrowing, the partnership aims to improve the success prospects of entrepreneurs who have historically been overlooked, while supporting job creation as a key impact measure.
African Bank Group Chief Transformation & Sustainability Officer, Edna Sathekga-Montse, framed the initiative within the bank’s legacy of serving underbanked entrepreneurs and communities. She noted that Township Spark continues a decades-long mission to create a “bank for the people, by the people”, using new pathways to finance township-based enterprises so they can grow, create jobs and contribute meaningfully to South Africa’s economy.
Township Spark is positioned as a practical example of modern development finance in action, moving beyond traditional grant-based approaches towards sophisticated blended-finance mechanisms that mobilise domestic capital for underserved communities. Its multi-tiered risk-sharing structure combines first-loss, junior and senior guarantees to reduce lending risk for participating financial institutions, modelling a scalable approach to inclusive finance.
As a coordinated partnership between government, global development actors and domestic financial institutions, the initiative ensures that policy and finance move in alignment, supporting a more enabling ecosystem for township MSMEs. With expressions of support already received from the Small Enterprise Development and Finance Agency (SEDFA) and the South Africa Department of Small Business Development (DSBD), Township Spark is expected to grow further as additional partners and capital are mobilised.
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