Author: 5iveafrica

FSD Africa launches feasibility study on innovative approaches to transferring MDBs capital to the private sector

Posted on by 5iveafrica

Nairobi, 30 May, 2024 – Africa’s development needs demand innovative financing solutions to bridge a staggering US$1.2 trillion gap for achieving its Sustainable Development Goals (SDGs) by 2030, alongside an annual climate financing need of nearly USD 300 billion. In response to this challenge, FSD Africa has secured funding from the Multilateral Development Banks (MDBs) Challenge Fund seeded by the Bill & Melinda Gates Foundation, Open Society Foundations, and The Rockefeller Foundation, to spearhead a pioneering project: the “Local Currency Solution for Multilateral Development Bank Portfolio Transfer” (the ‘Project’). It is very pleased to announce the release of its feasibility study report.

In June 2023, FSD Africa received funding to develop the project. Since then, it FSD Africa has conducted a comprehensive feasibility assessment and engaged in market-sounding conversations with MDBs, institutional investors, fund managers, investment banks, and other stakeholders. Today, it presents the findings of this assessment on the sidelines of the African Development Bank Annual Meetings in Nairobi.

The report explores innovative approaches to optimising MDB’s capital efficiency by partially transferring MDB-originated assets to local institutional investors on African capital markets, thereby enriching domestic capital markets and creating a new asset class for domestic institutional investors. It also investigates novel methods for transferring MDB-funded projects and portfolios to the private sector through local currency solutions. As a development finance agency, FSD Africa is committed to deepening domestic capital markets in smaller emerging economies and providing institutional investors, especially pension funds, with enhanced opportunities to invest in highly rated assets.

The project targets long-term investment needs, focusing on critical areas such as climate risk mitigation, renewable energy, infrastructure, urban development, and housing. By transferring parts of MDBs’ portfolios to local institutional investors in emerging markets, the initiative aims to unlock MDBs’ capital and expand the scope and size of their developmental mandate while also fostering domestic capital markets in Africa.

The feasibility study, developed by FSD Africa, delves into understanding the landscape of alternative investments in Africa, institutional investors’ appetite for such investments, and regulatory requirements and constraints. Additionally, as part of the pilot to be rolled out in the next phase of this project, FSD Africa will co-design the structure of a fund for portfolio transfer, aiming to institutionalize the MDB asset transfer process and thereby empower MDBs to provide more financing to developing and emerging economies.

The study focuses on seven key African countries: Kenya, Uganda, Tanzania, Nigeria, Ghana, Senegal, and Cote D’Ivoire, leveraging their relatively deep institutional investor base. Operational (brownfield) assets funded by MDBs in these countries will be identified for transfer.

“Addressing Africa’s critical development needs demands a transformative departure from conventional financing strategies. We must harness domestic institutional capital as a catalyst for change, complementing limited public funds and broadening access to local currency financing. This calls for an unconventional business approach, forging new asset classes, partnerships, and facilitators to mobilise capital effectively. Innovative mechanisms optimising MDBs’ capital efficiency and bolstering domestic markets pave the way for fresh investment opportunities, propelling Africa’s development agenda forward.” – Mark Napier, CEO of FSD Africa.

The study findings will be disseminated among stakeholders in the pilot countries, local institutional investors, and MDBs to gain endorsement and facilitate the implementation of the portfolio transfer model. This initiative marks a significant step towards leveraging local resources to drive Africa’s development.

Why African capital markets need an unshakeable foundation

Posted on by 5iveafrica

Ever wondered what policemen, electoral commissions, regulatory bodies and parents have in common? You guessed it, they enforce norms in the spheres of their influence, a crucial role I deeply respect from my almost nine years as a staff member at a financial sector regulator.  I will explain why.

Regulation is an art, not a science

Enforcing norms and legal rules in any sector is about striking the perfect balance. Overregulation can stifle innovation, while insufficient regulation can encourage malpractice.  My previous experience at the Capital Markets Authority, Kenya involved gatekeeping roles similar to those of an immigration officer, ensuring only qualified participants entered the market. I was also involved in the development process for various pieces of capital market and broader financial sector legislation.  This practice highlighted the artful nature of regulation – balancing enforcement with facilitation to foster market integrity and trust.

Challenges in African markets

Unlike developed markets, capital market regulators in Africa have the dual mandate of regulation and development. Developing these markets requires specialised skills and significant resources in human, financial and IT capacities.  This is something that regulators understand very well – and it falls on all African governments and policymakers to appreciate this as well.  Reason being, capital markets are built on trust – market players must have confidence in the way the market is run, giving credence to how it operates.  Effective market regulation hinges on the ability to detect and respond swiftly to fraud and misconduct.  It requires strong regulatory frameworks and the right tools.  Specialised skills are also required.  These cost a lot but are necessary for market confidence and functionality.

The benefits of well-regulated markets

When markets are well run, everyone benefits, from issuers seeking capital to investors looking for returns. Where markets function optimally, they mobilise long-term capital in local currency to power the real economy.  For example, enabling a water company to raise USD 20m for water infrastructure maintenance and water conservation efforts in Tanzania or mobilising USD 95m to finance a green mobility project in Morocco. This showcases successful capital mobilisation for significant projects and the immense opportunity to replicate it.

The broader context

While regulation is important, it is not the sole factor. A stable political environment and conducive macroeconomic conditions contribute to a thriving capital market.  I believe that African governments’ appreciation for not only the macro-level issues but also the opportunities for supporting capital market growth is always needed.  By aligning government policies and incentives, like tax neutrality for specific securities and exemptions for green bonds enables more efficient capital-raising efforts by the private sector and encourages innovative financing solutions.

I believe African governments realise that reliance on public financing through external debt borrowing in hard currency is not an infinite pot.  As of 2022, external debt in sub-Saharan Africa stood at USD 833 billion and this rises and falls depending on currency volatility.  This type of financing is not sustainable, and it will not meet all the continent’s development needs. Alternative financing options include using capital markets or a mix of different types of capital and risk mitigation instruments like guarantees, insurance, and currency hedging mechanisms.   This is the time to deploy this creative mix of financing solutions to fund sustainable development.

The role of FSD Africa

But back to my main point – capital market regulation and development are not a walk in the park.  At FSD Africa, we have implemented several regulatory support initiatives – helping regulators strengthen their institutional capacity and build robust regulatory frameworks and long-term capital market development plans.

In March 2024, our efforts in supporting development of the capital market intermediaries licensing and monitoring legislation assisted the Ethiopian Capital Markets Authority in granting a license to its first investment advisor.  This is a foundational step in the establishment of the capital market and mobilisation of capital.  In addition, our work with various regulators and exchanges to design rules for sustainable bond issuances has promoted capital raising of approximately USD 1.2 billion across the continent.  Such initiatives demonstrate the potential of regulated markets to mobilise sustainable finance and support Africa’s development.

An all-hands-on-deck approach is needed from the government and other market facilitators to support regulators in fulfilling their mandates.  And these dual mandates were made for this time in history – for this time in the continent’s sustainable growth trajectory.  I am sure as we support the implementation of regulators’ statutory mandates which the drafters of capital market legislation envisioned, our economies will be better for it.

First East African sustainability bond lists on the London Stock Exchange

Posted on by 5iveafrica

Original article by the impact investor

The NMB Jamii Bond, Tanzanian NMB Bank’s inaugural sustainability bond, has cross-listed on the London Stock Exchange to drive institutional capital into the country’s climate finance and development projects.

NMB Bank, a commercial bank in Tanzania, has announced the cross listing of its inaugural sustainability bond, the NMB Jamii Bond, on the London Stock Exchange.

The NMB Jamii Bond launched in both Tanzanian shillings and US dollars on the Dar es Salaam Stock Exchange in December last year, with anchor investments from development finance institutions British International Investment (BII) and the International Finance Corporation (IFC). It aims to increase investment into Tanzanian climate finance and development projects.

The dual-tranche bond raised a total of TZS 400bn (€142m) from both local and international investors in its initial offering, but it is the US dollar tranche that listed on the London stock market.

Ruth Zaipuna, chief executive of NMB, said: “Today’s listing of the Jamii Bond cements NMB Bank’s position as a trailblazer in sustainability within the African capital markets, and we are humbled that our commitment to ESG principles has garnered national and international recognition.

“This extraordinary success highlights the strong confidence Tanzanian and global investors have in NMB Bank’s soundness and commitment to sustainability across operations, business, community, and environment. It reaffirms our creditworthiness and reflects the desire of investors, both local and international, to seize the safe and impactful investment opportunities within Tanzania’s robust investment climate.”

BII, which as anchor investor committed €13.8m equivalent in Tanzanian shilling to the bond, confirmed it had no immediate plans to invest in the dollar tranche through the LSE.

Technical assistance

FSD Africa, a specialist development agency dedicated to mobilising sustainable financing for projects on the African continent, provided technical assistance for NMB Bank’s portfolio review, which was assessed by the not-for-profit organisation Climate Bonds Initiative (CBI), to ensure the bond’s alignment with various international organisations and their requirements and taxonomies.

Responding to questions from Impact Investor, Mark Napier, chief executive of FSD Africa, explained that the portfolio review was critical to identifying existing and pipeline green projects that an issuer could fund.

“A portfolio review assesses the nature of the projects to ensure that they align with the eligibility criteria for green projects.  It also enables an issuer to identify the funds required to meet the financing need for this portfolio,” he said.

FSD Africa also offered technical assistance towards securing Second Party Opinion (SPO) for NMB Bank’s sustainable finance framework, a document which explains to investors which eligible projects will be funded, how these projects are selected, how often impact will be reported and how the funds raised will be managed.

“A second party opinion is a required step under the International Capital Market Association  (ICMA) sustainability bond principles that assesses the bond framework. Investors rely on this second party opinion, undertaken by a third party, to make an informed decision as to whether to invest in a sustainable bond or not,” Napier explained.

Meeting Africa’s climate goals

Earlier this year, a UN economist predicted Africa would be $2.5trn short of the finance it needs to cope with climate change by 2030 despite, as a continent, contributing the least to greenhouse gas emissions.

Another estimate puts Africa’s climate finance needs at $277bn (€255bn) annually in order to meet its Nationally Determined Contributions, the climate action plans which detail countries’ commitments to achieving the global targets of the Paris Agreement.

The NMB listing is expected to contribute to plugging this gap, but private sector financing still has a long way to go with the 2022 Landscape of Climate Finance in Africa report, commissioned by FSD Africa and others,  revealing that it represented only 14% of all of Africa’s climate finance from 2019 to 2020, much lower than in other regions like South Asia (37%), East Asia and Pacific (39%), and Latin America & Caribbean (49%).

Napier said that during the period the report was undertaken, a key finding was that actual risk, perceived risk, and ticket sizes dissuaded private capital players, and that recommendations were made to address this.

“For instance, development partners could target higher leverage ratios through blended financing structures, with a particular focus on an enhanced role for private insurance and partial guarantees. They could also support capacity building both within domestic finance institutions and in developing a pipeline of investable opportunities.”

Information exchange platforms

He added that information exchange platforms and financial alliances such as the Glasgow Financial Alliance for Net Zero (GFANZ), a group of financial institutions formed during the COP26 climate conference in Glasgow, also had a role to play.

“Information exchange platforms could make existing transactions more visible to investors. International networks like GFANZ could support pipeline development and back transaction accelerators. They could also engage actively with domestic institutions to source and bundle viable, well-diligenced transactions,” he added.

The successful issuance of the dual-tranche Jamii Bonds on the Dar es Salaam Stock Exchange last year was said to highlight the growing capacity of local investors to meet the rising demand for climate and sustainability financing.

 

Tanga UWASA’s Water Green Bond oversubscribed, officially listed on DSE

Posted on by 5iveafrica

Tanga UWASA’s Water Infrastructure Green Bond, the first ever Sub-national bond to be issued in East Africa, has been oversubscribed by 103%. The green bond, worth TZS 53.12 billion, and launched on 22nd February 2024, was successfully listed at the Dar es Salaam Stock Exchange (DSE) on 15th May 2024. It performed impressively with 65% of collection being from local investors while attracting 35% of foreign investors. This is a clear indication of the growing interest in sustainable investment and confidence of international investors to the Tanzania market.

The Tanga UWASA bond will now be traded at the DSE, and funds raised will propel sustainable water supply infrastructure and environmental conservation efforts in Tanga. Listing of the Tanga UWASA bond signifies a successful demonstration that the existing regulations and frameworks can be used by municipalities, cities, and sub-national entities to raise significant capital from domestic markets, in local currency to finance development, and in turn reduce pressure on Government budget.

On his address, the guest of honor, Hon. Dr. Mwigulu L. Nchemba, Minister of Finance, said

“this event and similar events by Corporates in the recent past, is a clear testimony that the Alternative Project Financing Strategy (APF) launched by the Government in May 2021 is doable not only to corporates, but also to Government institutions. And considering that the fully amount required for project implementation is now available, the Ministry of Finance will keep on following up to ensure that this project is successfully implemented as planned.”

Hon. Jumaa Aweso, the Minister for Water highlighted that,

“financing needs for water infrastructure across the nation is still very high. Competing government priorities, and limited budget, results in delay of projects implementation. Bond issuance such as this one, complements government efforts and expedite provision of water services to the citizens. I urge other water utilities to learn from the Tanga UWASA bond and commence replication in their localities”.

On his key remarks, the Head of United Nations Capital Development Fund (UNCDF) in Tanzania Mr. Peter Malika congratulated the government for achieving this historic milestone. He added

“In collaboration with the government, our significance and support as a development finance institution has resulted in clearing and clarifying technical and policy hurdles that existed before this transaction, so that future transactions can use Tanga UWASA’s bond as a national template, fit for replication and taking to scale to other sectors such as energy, agriculture, health, education, income generation and productive sectors. I want to recognize the National Municipal Bond Taskforce, with this team we have built and entrenched a lasting crosscutting national capacities that ought to be emulated as a winning formula in other initiatives”.

From the regulator perspective, Mr. Nicodemus Mkama, Chief Executive of the Tanzania Capital Market and Securities Authority (CMSA) highlighted that,

“Successful issuance and listing of Tanga Water Bond on the Dar Es Salaam Stock Exchange, solidifies the position of Tanzanian capital markets on the map of global capital markets that offer innovative and sustainable financing products attracting both domestic and international investors. He further urged other subnational institutions and municipalities to emulate the path taken by Tanga UWASA, in financing revenue-generating projects through capital markets.”

In addition, “The listing of the TANGA UWASA bond demonstrates the power of collaboration between the public and private sectors, as well as the commitment of stakeholders to make investments that generate financial returns and positive impacts on society and the environment. Therefore, DSE invites public institutions, companies, and the private sector to continue this path of raising capital aimed at promoting and building a competitive economy for the development of people” said Ms. Mary Mniwasa, the Chief Executive Officer of DSE.

On his side, the Managing Director of Tanga UWASA, Eng. Geofrey Hilly, expressed immense pride and honor in witnessing the successful listing of the Tanga Water Bond. He emphasised its significance in advancing sustainable water infrastructure and environmental conservation, extending gratitude to investors, partners, and stakeholders for their unwavering support and trust. He assured the investors,

“as the pilot, we are determined to maintain a strong and unwavering commitment to our investors and the government, on professionalism, proper use of funds, honoring our obligations, and delivering quality water services to our customers”.

Other stakeholders involved in preparations of the Tanga water green bond includes NBC Bank (lead transaction advisor), FSD Africa (supported green framework), FIMCO and Global Sovereign Advisory (financial & investment advisory), ALN Tanzania (legal advisor), Innovex (reporting accountant), Vertex International Securities (stockbroker) and ISS Corporate Solutions (second-party opinion provider).

Landmark moment for African climate investment as sustainability bond secures London listing

Posted on by 5iveafrica

African climate investment received a landmark boost today with the cross-listing of NMB Bank’s (NMB) inaugural sustainability bond, the NMB Jamii Bond, on the London Stock Exchange. It will represent a new, vital and symbolically important route for institutional investors in the world’s largest capital markets to commit funds into African climate finance and development vehicles.

BII was an anchor investor in the Tanzanian shilling tranche of the NMB Jamii Bond and last year invested $1.3 billion in total into African businesses. The DFI is committed to ensuring that at least 30 per cent of its total commitments are in climate finance.

Christopher Chijiutomi, Managing Director and Head of Africa at BII, said: “The NMB listing represents a unique opportunity for UK and global investors to directly participate in Africa’s future. It will enhance vital inward investment into Africa and act as a proof point that sustainable development vehicles of this type can be attractive to the world’s largest institutional investors in London and elsewhere.”

Deputy Foreign Secretary and Minister for Development and Africa Andrew Mitchell commented: “The UK is proud to have supported NMB’s Jamii Bond in Tanzania – through British International Investment’s anchor investment and FSD Africa’s technical assistance support. It is the first sustainability bond to be offered in East Africa, highlighting the UK’s ongoing commitment to financing progress towards the UN’s Sustainable Development Goals and driving a green and sustainable future for the region.”

 Ms. Ruth Zaipuna, Chief Executive of NMB, said: “Today’s listing of the Jamii Bond cements NMB Bank’s position as a trailblazer in sustainability within the African capital markets and we are humbled that our commitment to ESG principles has garnered national and international recognition.

“This extraordinary success highlights the strong confidence Tanzanian and global investors have in NMB Bank’s soundness and commitment to sustainability across operations, business, community, and environment. It reaffirms our creditworthiness and reflects the desire of investors, both local and international, to seize the safe and impactful investment opportunities within Tanzania’s robust investment climate.”

Julia Hoggett, CEO of LSE plc added: “We are delighted to welcome NMB Bank’s sustainability bond to the London Stock Exchange, and to be the venue of choice for the bond’s first admission to trading outside Africa. This not only highlights NMB’s dedication to transparency and commitment to their sustainability objectives, but also showcases the continued international investor support that issuers across Africa can find in London. We are a leading global hub for sustainable finance and proud to be at the forefront of enabling capital flows towards the green economy.”

The need for inward investment into Africa has never been greater. According to ECPDM, the global think tank, the current finance gap per year is between $200-400 billion. The funds raised through the bond will be injected into high-impact companies that are combating the climate emergency and which support inclusive growth.

FSD Africa provided technical assistance for NMB Bank’s Portfolio Review assessed by the Climate Bonds Initiative (CBI) for alignment with ICMA and Multilateral Development Bank (MDB) principles and the EU & CBI Taxonomies. FSD Africa also offered technical assistance towards securing Second Party Opinion (SPO) for NMB Bank’s Sustainable Finance Framework.

Mark Napier, Chief Executive of FSD Africa, said: “Listing of the NMB sustainability bond on the LSE is a great milestone, and it signals the potential that entities in the African region have to tap sustainable finance both within and beyond the African continent.  Mobilising long-term capital at scale on the African continent continues to benefit from the collaborative partnerships from the city of London, and we are pleased to have extended technical assistance in support of NMB’s issuance of both their gender bond in 2022 and the sustainability bond in 2023.”

The NMB listing is expected to contribute to Africa’s climate finance needs – estimated at $277 billion annually to implement its NDCs and meet 2030 climate goals. From 2019 to 2020, private sector financing represented only 14 per cent of all of Africa’s climate finance, according to a report by the Climate Policy Initiative.

The successful issuance of the Tanzanian shilling and U.S. dollar Jamii Bonds on the Dar es Salaam Stock Exchange in December last year highlighted the growing capacity of local investors to meet the rising demand for climate and sustainability financing. The bonds align with the Sustainability Bond Guidelines of the International Capital Markets Association, which prescribe transparent and accurate reporting to stakeholders.

Issued in both local currency and the US Dollar, the dual-tranche bond raised a total of TZS 400 billion ($159 million) from both local and international investors in its initial offering. BII, as an anchor investor, committed $15 million equivalent in Tanzanian shilling to the bond. It is the US dollar tranche that will be listed on the London Stock Market.

FSDAi Nyala Facility invests US$ 1 million in Linea Capital to boost funding opportunities for small and growing businesses in South Africa.

Posted on by 5iveafrica

FSDAi Nyala Facility BV, a facility set up by FSD Africa Investments to invest in emerging local capital providers, is injecting US$1 million into Linea Capital, a South Africa-based financier. Linea Capital specializes in revenue-based finance (RBF), an innovative model that supports the growth of Small and Growing Businesses (SGBs).

Most SGBs on the continent are faced with limited funding options, and this is no different in SouthAfrica. Traditional debt either requires significant collateral or is unaffordable, while equity investments dilute ownership, control and long-term economic value and often involve lengthy negotiations on valuation.

By contrast, Linea Capital’s revenue-based financing solution is a collateral-light and non-dilutive source of capital, with repayments structured around the company’s revenue cycle to reduce the burden of fixed monthly repayments. Although driven by the investee’s revenue growth, the typical term of Linea’s financing ranges between 2 and 3 years. Linea also offers a range of post-investment support services aimed to help businesses manage growth.

FSDAi Nyala Facility’s investment will be through junior funding tranches to enable Linea to raise lower cost senior debt, with the intention of crowding-in local and global institutions seeking lower risk and more liquid non-equity investments.

This is the Facility’s third investment; previous investments include Aruwa Capital Management, a Nigeria-based fund that targets growing companies that either serve the expanding female economy or are led by women or gender-diverse teams, and WIC Capital, a Senegal-based manager that not only provides much needed capital but also technical assistance and access to business networks for female-led businesses in the region.

Speaking during the announcement, FSD Africa Investments’ Chief Investment Officer, Anne-Marie Chidzero hailed the novel financing instrument. “We are excited to collaborate with Linea Capital to accelerate local financing for small and growing businesses. This investment demonstrates FSDAi Nyala Facility’s mandate of backing innovative financing solutions that position these businesses to thrive and drive economic growth,” noted Anne-Marie.

Linea Capital cofounders Julia Price and Colin Hundermark welcomed the investment which will translate to an attractive capital alternative for small and growing South African companies “We are delighted that FSDAi Nyala Facility is making this investment with us. It provides further support for revenue-based financing as an alternative for the owners and founders of SGBs in South Africa, and we are excited about how it will assist us in raising further capital to support the growth of a vital segment of our economy,” they explained.

FSD Africa Investments and Allied Climate Partners collaborate to attract catalytic equity to African funds focused on early-stage, climate-related opportunities

Posted on by 5iveafrica

FSD Africa Investments and Allied Climate Partners have today entered into an Memorandum of Understanding and will partner to address a critical financing gap for climate infrastructure, mitigation and adaptation in Africa. This aligns with the core missions of both organizations: to increase the number of bankable opportunities for climate-related investment, increase private sector participation, improve livelihoods, and mitigate the effects of climate change across Africa.

FSD Africa Investments (FSDAi) invests to make finance work for Africa by allocating catalytic capital to market shaping instruments, intermediaries and infrastructure and has cumulatively invested US$ 105 million with a portfolio of 19 projects.

Allied Climate Partners (ACP) seeks to aggregate approximately US$ 825 million backed by US$ 235 million in philanthropic capital to support the establishment of third-party funds, platforms, and other investments in early and development stages of climate-related projects in Africa, Southeast Asia, India, and the Caribbean & Central America. Allied Climate Partners invests junior, first-loss equity in regionally focused third-party funds. ACP announced its inaugural investment into the Southeast Asia Clean Energy Fund II, managed by Clime Capital, in January, and is seeking to replicate similar investments in other regions.

Speaking during the MoU signing ceremony on the sidelines of the ongoing AVCA annual summit in Johannesburg, South Africa, FSDAi Chief Investment Officer Anne-Marie Chidzero hailed the collaboration as one that will support Africa to meet her ambitious climate finance goals.

“For the African continent to meet her NDCs, we must raise tenfold current annual climate finance levels to US$ 277 billion, and the share of private capital to at least US$ 100 billion. Working with ACP, we will be able to catalyse and crowd in more innovative and green finance for greater action”, said Chidzero.

ACP Chief Executive Officer Ahmed Saeed noted that this collaboration will drive innovation across the African continent, specifically mobilising more climate finance for Africa.

“There is a critical gap in climate finance, and specifically risk-oriented equity, available for emerging and developing economies to meet climate and energy transition goals. We are thrilled to partner with FSDAi, a pioneering organisation at the forefront of strengthening private sector participation and financial markets in Africa. Together, we hope to attract more risk-oriented capital for early-stage investments in Africa, by establishing new, catalytic, blended finance solutions that will leverage public and private capital to tackle the climate crisis”, explained Saeed.

Working in concert, FSD Africa Investments and Allied Climate Partners will identify, evaluate, and seek to invest in highly catalytic financing solutions in Africa that increase investment for early-stage project development and companies deploying climate-related infrastructure in Africa. The sectors to be targeted owing to their potential to accelerate a low-carbon transition and improve livelihoods include: clean energy generation and transmission; electric transportation; green industry; and, water and waste management. Selected investment managers will seek to invest in high-leverage and catalytic projects, platforms and companies with demonstrable and positive impact on climate in Africa, and which have the potential to mobilise third-party capital at scale.

Ethiopian Securities Exchange (ESX) Closes Its Capital Raise Significantly Oversubscribed by Domestic and Foreign Investors

Posted on by 5iveafrica

The Ethiopian Securities Exchange (ESX) announced today the successful closing of its capital-raising exercise, surpassing by more than two-fold the amount of funds it sought to start its operations. Initiated in November 2023, with intensive efforts by its management and advisors and roadshows in Addis Ababa, Nairobi, and London, the Exchange witnessed dramatic interest by domestic and foreign commercial investors, obtaining a whopping ETB 1.51 billion (US$ 26.6 million), representing subscription of 240% of its initial target capital raise of ETB 631 million (US$ 11.07 million), with participation by a total of 48 domestic and foreign institutional investors across financial and non-financial sectors.

ESX was established in October 2023 through a pioneering public-private partnership with the Government of Ethiopia through the Ethiopian Investment Holdings (EIH), its strategic investment arm, as the founding shareholder, with a mandated total public shareholding of up to 25%, with the remaining 75% to be private shareholding.

At present, the list of investors includes foreign strategic investors, including FSD Africa, the Trade and Development Bank Group (TDB), Nigerian Exchange Group (NGX), along with 16 domestic private commercial banks, 12 private insurance companies, as well as 17 other private domestic investors. Public sector interests, jointly representing 25% of shareholding, include EIH and its subsidiaries such as Ethiotelecom and the Commercial Bank of Ethiopia, among others.

The overwhelming interest as investors rallied around the Exchange, up to the close of the capital raise period, signals the enthusiasm and confidence that the ESX heralds a major milestone in the country’s journey towards financial sector development and economic transformation. By facilitating the mobilisation of capital, enhancing transparency, and promoting corporate governance standards, ESX aims to unlock new avenues for investment, spur entrepreneurship, and catalyse sustainable development across various sectors of the economy.

“We are thrilled to have exceeded all our expectations in terms of the capital raise and are excited by the overwhelming confidence shown by investors in the long-term prospects of both ESX and Ethiopia’s capital markets more broadly,” said Tilahun Esmael Kassahun (Ph.D), CEO of the ESX, adding that “strategic foreign investments by TDB, FSD Africa, and NGX Group are particularly important in allowing the transfer of technical knowhow and best practices as well as other areas of long-term strategic value that we will explore.”

ESX also announced today other progress, including the release of its draft Exchange Rulebook for public consultation, the completion of the technical evaluation for the selection of its technology provider, a major milestone to operationalising the Exchange’s trading, and issuer and investor education plans in the coming months leading up the launch of this exciting development for the Ethiopian economy.

Nairobi Climate Network announces the launch of the Carbon Markets Association of Kenya

Posted on by 5iveafrica

The Nairobi Climate Network (NCN), a thriving community of professionals propelling climate action in Kenya, is pleased to announce the upcoming launch of the Carbon Markets Association of Kenya (CAMAK) at a networking reception during the Kenya Carbon Markets Conference 2024.

This networking launch event is co-hosted by the Climate Impact Partners and supported by FSD Africa and Bowmans Law. It will bring together government officials, private sector leaders, financial institutions, and carbon markets experts to mark the establishment of this groundbreaking association. The partners congratulate the Kenyan government on the progress made to the forthcoming regulations and look forward to seeing Kenya leverage the potential of carbon markets for the benefit of its population and the planet.

The Carbon Markets Association of Kenya, incubated by the Nairobi Climate Network (NCN), represents a pivotal step in Kenya’s journey towards building a collaborative and enabling environment for high-quality and inclusive carbon projects. CAMAK’s vision is for Kenya to lead the world in generating high-quality carbon credits that bring tangible benefits to communities and the planet. Its mission is to unite carbon market practitioners and stakeholders, providing a collective voice for the industry in Kenya, while upholding the values of integrity, collaboration, and innovation.

CAMAK’s initial activities will focus on representing industry players, advocating for carbon market developments, and facilitating the sharing of best practices within the sector. Membership requirements include being registered in Kenya and actively engaging in project development or contributing to carbon market finance, research, or advisory. Fees will consist of an admission fee and an annual membership fee, with discounted rates for small-scale developers. During its setup phase, CAMAK will be incubated within the Nairobi Climate Network (NCN) with an interim governing council, which includes prominent industry figures such as Mahlon Walo, Bryan Adkins, Héloïse Zimmermann, Tarn Breedveld, Olivia Adhiambo, Molly Brown, and Charles Waweru.

“We congratulate the Kenyan government on the progress made in carbon market regulations and are proud to have played a role in supporting these developments. We are delighted to transform our carbon markets working group into a formal industry association for the advancement of carbon markets in Kenya.” Héloïse Zimmermann, Co-Founder, Nairobi Climate Network

“The launch of CAMAK demonstrates another significant step towards harnessing the potential of carbon markets for Kenya, and strengthening Kenya’s pathway to climate-positive growth. We look forward to engaging with the Association to continue the dialogue with industry players and ensure the development of high quality, inclusive carbon projects for Kenya.” Ali Mohammed, Special Envoy for Climate Change, Executive Office of the President of Kenya

“As developers of high-quality carbon projects, Climate Impact Partners is proud to support the establishment of CAMAK. This initiative reflects our shared commitment to advancing carbon markets in Kenya whilst unlocking new opportunities for sustainable development.” Faith Temba, Sourcing Manager, Climate Impact Partners

“Kenya has made impressive progress with its revised carbon markets regulations and is now in a strong position to leverage the potential of carbon markets for the benefit of its population and the planet. By bringing together industry players and stakeholders, CAMAK will play a crucial role in advancing carbon markets and climate finance, helping to accelerate climate action in Kenya” Mark Napier, CEO, FSD Africa

“Bowmans Law is pleased to see proactive engagement by the Kenyan government on the recent legislative developments, that will enable Kenya to realise the opportunities from carbon markets. We are proud to support the launch of CAMAK and see collective action from industry players helping to create a more enabling environment for carbon projects and leading to direct benefits for communities in Kenya.” Christina Nduba-Banja, Partner, Bowmans Law

SWISS RE Foundation extends funding support to BimaLab Africa Insurtech accelerator I

Posted on by 5iveafrica

The acclaimed and innovative Bimalab Africa Insurtech accelerator program by FSD Africa is now set to expand to cover a total of fifteen countries across the African continent from the initial ten countries covered in the 2023 program, following a US$ 600,000 support by Swiss Re Foundation.

Launched in Kenya by FSD Africa in 2020 and supported by the Swiss Re Foundation since 2023, the BimaLab Africa Insurtech Accelerator Program offers hands-on venture-building support to high-impact insurtech start-ups that improve the resilience of underserved and climate-vulnerable communities.

In this extension of the Foundation’s support through 2025, BimaLab will expand its footprint to accelerate 55 insurtechs in a total of 15 African countries. It will build strong innovation ecosystem by activating investors, capacity-building networks, and corporate institutions to unlock capital, attract talent and share knowledge about insurance solutions tailored to those communities’ needs.

BimaLab Africa addresses problems faced by vulnerable communities and businesses, it gives priority to enterprises that address challenges on climate change, health and gender as well as obstacles faced by micro, small and medium enterprises. Africa’s protection gap, or uninsured losses, for natural catastrophes was around 80% of the total economic losses they caused in 2022, up from 58% one year earlier. These figures highlight the severity and volatility of the region’s natural disasters as well as its lack of financial protection against them. BimaLab Africa will create an insurtech innovation ecosystem that supports the growth of insurtechs; reach underserved markets, communities and households.

“Insurance provides a crucial safety net when people experience threats like natural disasters, ill health or economic disruption.  We are proud to scale our partnership with BimaLab Africa, an initiative we strongly believe in. Bimalab Africa supports the growth of insurtechs, their reach to underserved markets, communities and households. It creates an insurtech innovation ecosystem in Africa. ” said Stefan Huber Fux, Director of the Swiss Re Foundation.

Bimalab Africa program is a unique programme bringing together insurance innovators, technology partners, insurance firms, investors, and regulators to work in concert in unlocking industry bottlenecks in modernising insurance services. Previously Bimalab Africa has had chapters supporting insurtechs in Egypt, Ethiopia, Ghana, Kenya, Morocco, Nigeria, Rwanda, South Africa, Uganda, and Zimbabwe. Among the new countries where the programme seeks to spread wings to are Tanzania, Tunisia, Senegal, Zambia, Malawi, and Somalia.

FSD Africa Principal Innovation and Resilience and Bimalab Africa Programme Lead Elias Omondi says the impact of the programme has been phenomenal over the last four years in expanding the reach of the program and playing a catalytic role in innovation by developing products for vulnerable customers and attracting investors to insurtech startups.

“BimaLab Africa enables startups enjoy access to a structured learning environment, mentorship, funding connections and a network of like-minded entrepreneurs, financiers, tech companies and regulators that can help them grow their businesses.  We have supported 63 startups since 2020 and facilitated development of 3 regulatory sandboxes. Furthermore, investors have supported ten ventures providing over US$10 million in funding and over 40 products developed have reached more than 3 million new customers reached” said Elias Omondi, Principal from FSD Africa.

Insurance penetration in Africa has been lagging compared to other parts of the globe at only 3% compared to the world average of 7%. Innovation and technology are expected to play a key role in addressing the challenge.