UNDP South Africa, UNCDF and partners at the official launch of Township Spark, a new blended-finance guarantee facility advancing access to finance for township-based MSMEs. Photo credit: UNDP

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, officially launched Township Spark, on the margins of the G20 Social Summit.

Building on the priorities and momentum of South Africa’s G20 Presidency, Township Spark is an innovative blended-finance initiative designed to unlock new capital flows for township-based micro, small, and medium-sized enterprises (MSMEs), particularly youth- and women-led enterprises.

Township Spark is a unique syndicated “club” guarantee structure that blends and leverages the de-risking capabilities of public development finance partners to catalyze commercial capital flows to vital and underserved township markets. Through this facility, the partners aim to address the persistent financial exclusion of township economies, catalyzing agile lending solutions, testing alternative credit metrics and generating actionable market data to shape scale-up and replication in South Africa and across the African continent.

South Africa’s township economy contributes an estimated R1 trillion annually and sustains millions of livelihoods through small-scale trading, services, and manufacturing. Yet nearly 80 percent of township businesses remain informal, disconnected from mainstream finance, and unable to start or scale. This calls for the need for targeted, catalytic interventions that can unlock access to affordable capital, formalise enterprises, and create a pathway for township entrepreneurs to participate meaningfully in the wider economy.

UNDP South Africa Deputy Resident Representative, Dr Gloria Kiondo, emphasized the power of coordinated action. “The launch was a reminder of what’s possible when UN agencies move with purpose, pace, and the ability to convene multisectoral partners,” said Dr Kiondo. “Through collaboration with government, financial institutions and development partners, Township Spark bridges public and private capital to unlock opportunities where they are most needed.”

UNCDF Chief Investment Officer Srilata Kamilla added “Township Spark is a prototype for the post-Sevilla agenda—showing what becomes possible when innovation, blended finance, and partnership converge to unlock growth in early-stage and last-mile markets. By pooling development finance across international and domestic actors into a syndicated guarantee facility and leveraging a domestic bank to crowd in private capital, we are providing township entrepreneurs access to affordable, catalytic finance. Together, we're expanding the very toolkit available for financing development."

DBSA welcomed the introduction of smarter, evidence-based lending tools. Township Spark represents precisely the kind of partnership-driven innovation that DBSA was designed to support,” said Palesa Ryan, Head of Social Housing, Health & Education. “Our strategy has long recognized the importance of small-business development. By working with UNDP, UNCDF, African Bank and other development partners, we can incorporate smarter credit-risk approaches that reflect the real conditions of township enterprises. Sitting behind the first-loss layer allows us to lower the cost of borrowing and improve the chances of success for entrepreneurs who have historically been overlooked.”

Bringing in the perspective of the commercial banking sector, African Bank Group Chief Transformation & Sustainability Officer, Edna Sathekga-Montse, highlighted both the historical context and the future opportunity unlocked by this facility.

“By participating in this catalytic guarantee facility, African Bank is reaffirming its commitment to reimagining how capital can be used to unlock the country’s most vibrant yet constrained entrepreneurs. This collaboration enables us to play a pivotal role in expanding credit access to MSMEs in township settings, laying the groundwork for sustainable wealth creation, job growth, and a more inclusive economy. In doing so, we honour our legacy while shaping a future where every entrepreneur has the opportunity to ignite their potential.”

Township Spark is a practical demonstration of what modern development financing looks like in action: moving beyond grant-based support toward sophisticated blended-finance mechanisms that mobilize domestic capital for underserved communities. The initiative showcases how the UN system can influence financial architecture, catalyze domestic resources, and support MSMEs with real investment capital, not just advisory services.

As a coordinated partnership among government institutions, global development partners, and domestic financial institutions, Township Spark ensures that policy and finance move in sync. Its multi-tiered risk-sharing structure blends first-loss, junior, and senior guarantees to reduce lending risk, modelling a new way of financing inclusion at scale.

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 will only continue to grow.