This article was first published on the Convergence website.
FSD Africa Investments (FSDAi) is a specialist financial sector investor. Established by FSD Africa and the United Kingdom’s Foreign, Commonwealth & Development Office, FSDAi invests patient, risk-bearing capital in financial intermediaries, facilities, and instruments that advance how the African financial system drives green, economic growth. To date, they have committed about GBP 127 million across 21 investments.
We spoke with Anne-Marie Chidzero, Chief Investments Officer about how they approach blended finance, the lessons they have learned about measuring impact and success, gender considerations in FSDAi’s work, and more.
What are FSDAi’s key priorities and what are you focusing on right now?
A key priority for us is strengthening the core functions of Africa’s financial systems, particularly the financial infrastructure needed to mobilize the continent’s own institutional capital. Africa holds more than $4 trillion in local institutional savings, and this pool is growing rapidly. Yet it remains largely absent from productive private markets. A second priority is scaling finance for energy generation and distribution, the infrastructure that underpins sustainable growth, and nature-positive outcomes. In each case, our aim is to demonstrate a commercial case strong enough to attract further capital. Ultimately, we want to broaden the diversity and depth of capital allocators in our markets, from those serving small and growing businesses to larger institutional asset managers.
Tell us about your approach to blended finance and how it has evolved.
FSDAi uses its catalytic capital to assume early transaction risks, test new models, and mobilize third-party capital. These structures then enable markets to attract further capital for Africa’s sustained growth. For example, our first investment was in the Africa Local Currency Bond Fund (ALCB Fund). By anchoring local-currency bond issuances, the ALCB Fund draws domestic capital into the market while strengthening how local bond markets function.
We deploy catalytic capital for market-shaping transactions at the frontier of finance, and we use our position as an active investor to engage directly in the design of innovative financial instruments and structures that are mostly blended.
Our approach has evolved over time toward co-creating blended finance vehicles that meet the capital needs of the investors we aim to mobilize, such as domestic pension funds. We work backwards, asking what tenor, currency, governance standard, reporting, and risk allocation would make a vehicle investable for them, and how our capital can help address the obstacles that keep them out.
We also pay keen attention to replicability. A structure that cannot be replicated in other markets is a subsidy, not a market intervention. We work upstream with FSD Africa’s market-building teams on regulation, policy, and market infrastructure, so that the structures we invest in are supported by enabling environments.
FSDAi has featured in notable strategic transactions, including the Ci-Gaba Fund, ARM-Harith’s Climate Transition Fund, and, most recently, the Cape Water Performance-Based Bond. Tell us more about FSDAi’s role in these transactions.
In the Ci-Gaba Fund, we were a co-creator rather than simply an investor. Drawing on FSD Africa’s market-building work in Ghana, we helped design and underwrite a fund of funds that met Ghanaian pension regulatory requirements and governance standards, then anchored it with $7.5 million. The first close exceeded its $30 million target with more than two-thirds anchored by domestic pension funds, making it Ghana’s first private fund of funds built for domestic capital mobilization at scale.
For ARM-Harith’s Climate Transition Fund, our contribution was structural. Alongside the African Development Bank Group’s Sustainable Energy Fund for Africa, we provided a combined $20 million of catalytic capital to de-risk pension participation in Africa’s first integrated multi-currency blended finance platform for infrastructure equity; US dollars and local currency in a single vehicle, addressing the mismatch between hard-currency fund structures and local-currency project revenues.
In the Cape Water Performance-Based Bond, we committed ZAR 234 million as an anchor investor alongside the International Finance Corporation. That capital helped validate a highly novel structure, unlocked local pension funds and asset managers, and established a template other investors can reuse.
The transactions mentioned above are diverse; how do they reflect FSDAi’s investment approach and your objective to deepen capital markets across the continent?
While the instruments may seem unrelated – a fund of funds, an infrastructure equity platform, a listed bond – the thesis behind them is the same. Africa does not lack capital or investable activity, it lacks instruments that let domestic institutional money reach that activity on terms its own regulators and trustees will accept.
Each transaction adds a missing piece of market architecture. The Ci-Gaba Fund creates a governed channel for pension allocations into private markets in a country where those allocations barely existed. ARM-Harith’s Climate Transition Fund makes local-currency infrastructure equity possible, removing the currency mismatch that has kept pension funds out of the asset class. The Cape Water Performance-Based Bond places an independently verified environmental outcome inside a listed, senior unsecured instrument, opening a new asset class on the Johannesburg Stock Exchange.
Deepening capital markets means widening the instrument set, broadening the investor base, and strengthening the intermediaries in between. That is why we accept the transaction costs of first-of-a-kind deals; going in first so that other investors can follow at a fraction of the effort.
What lessons have you learned about measuring the impact and evaluating the success of the blended finance transactions that you featured in?
Three lessons stand out. First, deal-level metrics such as jobs, hectares cleared, businesses financed, and people reached all matter but our real test is market change: did the structure get repeated, did new investors enter, did the regulator move, did the second transaction need less catalytic capital than the first?
Second, outcome definitions have to be bankable before they are agreed. The Cape Water Performance-Based Bond clearly demonstrates this. Linking investor returns to independently verified hectares of invasive alien plants cleared required the parties to settle measurement, verification, and dispute resolution at the structuring stage rather than after signing.
Third, is patience. Market-building effects lag financial returns by years, and claiming clean causality in a syndicated transaction is rarely credible. We rely on interim signals such as follow-on funds, second issuances, and replication by commercial arrangers instead. We also publish our reasoning behind these investments so others can judge it for themselves.
Do you apply a gender lens in your blended finance work? At what stage are gender considerations typically discussed?
FSDAi is intentional about applying gender as one of the lenses it uses to influence an inclusive financial system. We have invested in gender diverse teams that promote the role of women as allocators of capital, decision makers, and beneficiaries. Our Nyala Facility was built specifically to back alternative local capital providers that apply gender-lens investment strategies. That includes Aruwa Capital Management in Nigeria, Women’s Investment Club Capital in Senegal and Côte d’Ivoire, Linea Capital in South Africa, and Iungo Capital in East Africa, where many of the businesses financed are expected to be founded, owned, or led by women.
Gender considerations are integrated at an early stage in our investment process. We apply the 2X Criteria on Women in Leadership to screen investments. When we see an opportunity to influence more diversity, we include such requirements in the environmental, social, and governance action plan and in the key conditions for our investment. Currently, over 80% of our investments meet the 2X Criteria on Leadership and we are committed to continuing to allocate more capital to blended vehicles that reflect the gender diversity that is needed across Africa’s financial markets.
The investment landscape across emerging markets has been volatile in recent years, especially with receding development funding. How is FSDAi adjusting to this?
In our view, the investment landscape has evolved. While Africa continues to be perceived as a high-risk investment destination, FSDAi’s work is fundamentally about addressing that risk by deepening financial markets. This means supporting better pricing of risk, improving the availability and quality of market data, strengthening financial allocation infrastructure, and helping to create the conditions for a lower cost of capital over time. That is the nature of our work: building the market foundations that allow capital to move more efficiently, confidently, and at scale.
How do you see FSDAi’s blended finance activities evolving in the future, and where do you see opportunities to continue deepening the impact of your work?
We see at least two directions of travel. The first is co-creating blended finance vehicles in thematic areas where the investment case needs to be built, nature-based solutions is the clearest example. The Cape Water Performance-Based Bond showed that ecological outcomes can be independently verified and priced inside a mainstream listed instrument. That template is not confined to water, or to South Africa, and the work now is adapting it to other ecosystems and other markets.
The second is anchoring country-specific vehicles designed around the regulatory requirements of domestic pension funds. The Ci-Gaba Fund in Ghana and ARM-Harith’s Climate Transition Fund in Nigeria both began from what trustees and regulators in those markets could approve, rather than from a structure imported wholesale. That approach takes longer, but it is the only route to allocations at scale.
Replicability is the discipline that connects the two. We prioritize vehicles that can be lifted into a second market with less catalytic capital than the first one required because a structure that works only once, and only with us in it, has not yet changed the market.
