Madagascar Entrepreneur Eyes Kenya as Guarantee Model Targets Africa’s SMEs

 By Evans Mutinda.

For many small-business owners, a lack of collateral can be the difference between securing a loan and watching an opportunity slip away.
For Madagascar-based financial entrepreneur Hagasata Rakotoson, that problem is personal. Three decades ago, he experienced the difficulty of trying to access credit without sufficient collateral. Rather than accept the barrier, he turned the experience into a business idea — one that he now hopes can help thousands of entrepreneurs across Africa.
“If we have a lack of guarantees, let’s set up a guarantee fund,” Rakotoson said.
That idea has evolved into a credit-guarantee model that, according to Rakotoson, has already supported more than 40,000 SME loans in Madagascar and provided guarantees worth more than $100 million.
Now, he is looking to Kenya as the next frontier.
From a personal struggle to an SME financing model
Rakotoson’s mission is straightforward: help businesses that have viable ideas and the ability to repay loans but lack the collateral traditionally demanded by lenders.
The model provides lenders with a guarantee, reducing their exposure to losses and making them more willing to extend credit to small and medium-sized businesses.
Rakotoson believes the approach could be particularly powerful as Africa’s financial sector becomes increasingly digital.
Across the continent, telecommunications companies and financial institutions are using mobile technology to provide increasingly small, rapid loans — often referred to as non-loans. But while digital lending has expanded access to finance, Rakotoson argues that many entrepreneurs remain underserved.
His proposed solution is to attach guarantees directly to non-credit.
“We want to put guarantees in each nano-credit,” he said.
The idea is to give lenders greater confidence to extend financing while enabling more small businesses to access credit without having to provide traditional forms of collateral.
Betting on SMEs to drive growth
For Rakotoson, the initiative is about more than financial services. It is also about economic development.
“As an entrepreneur, but also a patriot, I know that SMEs really count for the economy,” he said.
Small businesses employ millions of people across Africa and form the backbone of many local economies. Yet access to affordable finance remains one of the biggest obstacles to their growth.
Rakutinson argues that when businesses can obtain financing at the right time, the benefits can go beyond the individual entrepreneur. Additional capital can help a business increase production, expand its operations, hire workers and generate more revenue.
He says some SMEs supported through the guarantee model in Madagascar have doubled their turnover.
“For us, the battle is to help entrepreneurs and SMEs to be financed,” he said.
The trust challenge
Taking the model across borders, however, will not be easy.
Rakotoson says one of the biggest challenges is building trust with banks, telecommunications companies and other financial institutions.
“The challenge is to have the trust of the telcos,” he said.
Potential partners, he explained, need assurances that the guarantees are backed by credible financial resources and that the institution providing them will be able to honour its obligations when borrowers default.
That credibility is critical. For lenders, a guarantee is only as valuable as the institution standing behind it.
Rakotoson says partnerships with international development organisations, including the World Bank and the French Development Agency, have helped strengthen confidence in the model in Madagascar. He hopes to establish similar partnerships as he expands across Africa.
Why Kenya?
Kenya’s sophisticated digital-finance ecosystem makes it a natural market for Rakotoson’s expansion plans.
The country has become one of Africa’s most dynamic financial technology markets, with mobile money, digital banking and mobile lending deeply integrated into everyday commerce.
Rakutinson is now engaging Kenyan banks and other financial players, pitching the guarantee model and seeking partners willing to test its potential.
“I am marketing my business to all the banks in Kenya to make it attractive and create appetite,” he said.
But securing commercial partners is only part of the journey. Rakutinson says the next stage will involve discussions with regulators, including the Central Bank of Kenya, to demonstrate how the guarantee model can operate within the country’s financial system.
A bigger African ambition
Kenya is therefore more than another market for Rakotoson. It is a potential launchpad for a broader African expansion strategy.
His ambition is to build a system in which a lack of collateral no longer automatically prevents a promising entrepreneur from accessing finance.
The proposition is simple but potentially far-reaching: if lenders can share or reduce their risk, they may be able to lend to more businesses — including through the digital channels that are already reaching millions of Africans.
For Rakotoson, the ultimate goal is not simply to guarantee loans. It is to remove one of the barriers that has kept countless entrepreneurs outside the formal financial system.
“If we have a lack of guarantees,” he says, the answer is to build a mechanism that provides them.
Now, with Kenya in his sights, Rakotoson is betting that a solution born from his own struggle with access to credit can become part of a much bigger African story — one in which more small businesses get the financing they need to grow, create jobs and turn opportunity into economic impact.