Author: 5iveafrica

Catalytic patient capital provided by FSD Africa Investments for climate venture building

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Persistent raises $10 Million Equity Round led by Kyuden International and FSD Africa to grow climate venture building in Africa

New York, Nairobi, Tokyo: 12 July 2022 – Today, Persistent Energy Capital LLC announced that it has raised USD 10M in equity in its Series C round.  The raise, which was achieved with the support of two lead institutional investors, Kyuden International Corporation and FSD Africa Investments, will enable Persistent to continue to grow its successful climate venture building business in Africa.

The equity raise took the form of Series C Preferred Units of ownership in Persistent, giving Series C investors a seat on the Board of Directors. The largest investor of this Series C round, Kyuden International Corporation (“Kyuden”), is the overseas business arm of the Japanese Kyushu Electric Power Group. Kyuden has energy investment activities and consulting services across the world and shares with Persistent a strong commitment to renewable energy and building sustainable communities. Investing in Persistent represents a strategic move for Kyuden to expand their overseas business with an established partner in Africa, where the demand for clean power and electric mobility is growing dramatically. Persistent will benefit from the expertise, know-how, and network accumulated from domestic and overseas energy businesses of Kyuden around the globe.

This successful fundraise was also achieved thanks to the catalytic patient capital provided by Financial Sector Deepening Africa Investments Ltd.

We are delighted to support Persistent as it expands its innovative climate venture building model. We look forward to working with the Persistent team to accelerate the investment needed by African entrepreneurs in the nascent and fast-growing climate sectors. The combination of Persistent’s capabilities and approach, together with FSDAi’s expertise, patient capital and focus on green finance represents a very strong proposition in areas where innovation and early-stage equity capital are highly needed.
Anne-Marie Chidzero, CIO – FSD Africa Investments

FSD Africa Investments joins 2X Collaborative

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Membership to 2X Collaborative paves way for FSD Africa’s participation in the co-creation of the 2X Certification mechanism and enhances FSD Africa Investment’s co-investment, networking and partnership opportunities on gender lens investing

Nairobi: 5th July 2022: FSD Africa Investments (FSDAi), the investment arm of FSD Africa has today joined the 2X Collaborative.  Launched at the UN Generation Equality Forum 2021 in partnership with GenderSmart and the Investor Leadership Network (ILN), the 2X Collaborative is a leading industry body for gender lens investing. Its mission is to convene and equip investors to increase the volume and impact of capital flowing towards women’s economic empowerment.

FSDAi’s membership to 2X Collaborative will provide access to peer learning networks, knowledge, co-investment platforms, partnership and training opportunities, and innovative investment tools.  These benefits are useful for FSDAi in applying a gender lens investing framework through its investments such as Nyala Venture which provides a facility for local capital providers that are mostly women-led or apply a gender lens in their approach.

There is a huge opportunity to finance inclusive and accelerated green growth in Africa by tapping into the economic participation of women. We are therefore delighted to join the 2X Collaborative and shine a light on GLI investing to advance innovations that demonstrate the investment case for gender smart finance.
Anne-Marie Chidzero, CIO – FSD Africa Investments

Current levels of climate finance in Africa falling drastically short of needs

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A report released today by the Climate Policy Initiative finds that Africa needs approximately USD 2.8 trillion, or USD 250 billion each year, between 2020 and 2030 to implement its Nationally Determined Contributions (NDCs).

The study shows that total annual climate finance flows in Africa for 2020, domestic and international, were only USD 30 billion, just 12% of the amount needed. The financing gap is significant: All African countries together have a GDP of USD 2.4 trillion (World Bank 2021), implying that 10% of Africa’s current annual GDP needs to be mobilized above and beyond current flows every year for the next 10 years.

This analysis is based on the 51 out of 53 African countries that provided data on the costs of implementing their NDCs. Collectively, they represent more than 93% of Africa’s GDP.

Africa needs approximately $2.8 trillion between 2020 and 2030 to implement its NDCs. Out of this $2.5 trillion must come from international public sources and the domestic and international private sectors. These needs represent 10% of Africa’s total annual GDP.

South Africa, Ethiopia, Nigeria, and Egypt have the highest needs per year, together representing almost USD 151 billion per year. These needs as a percentage of GDP vary across countries. For instance, South Africa and Ethiopia have needs of 32% and 23% of their GDP, respectively. While Nigeria’s needs ($12 billion) are only 3% of the national GDP. Similarly, Egypt estimates needs of around $7.3 billion, less than 2% of its GDP.

Adaptation accounted for only 24% of total climate finance needs identified, despite Africa being highly vulnerable to climate change and calls for a better balance of finance between mitigation and adaptation. Adaptation needs are likely to be underestimated due to a lack of data and technical expertise to estimate the true cost of adaptation measures.

Mitigation accounts for the largest share of reported needs in 2020-2030, at 66% of total climate finance needs. Mitigation needs are predominantly split across four sectors: transport (58%), energy (24%), industry (7%), and agriculture, forestry, and other land use (AFOLU) (9%). However, results are heavily weighted to a few countries, in particular South Africa, which accounts for most transport needs. Excluding South Africa, the composition of mitigation needs per sector is energy (39%), AFOLU (27%), industry (20%), and transport (10%).

The private sector has significant potential to meet Africa’s climate finance needs. Public funding alone will not be sufficient, given the magnitude of investments needed, and current and future constraints on public domestic resources in Africa. However, most current climate financing in Africa is from public actors (87%, USD 20 billion) with limited finance from private actors.

To mobilize private finance, public actors need to improve policy frameworks and investment environments and deploy concessional financing to target investment barriers. Investment barriers are typically context-specific but can include technology-specific barriers such as uncertainty with respect to performance; policy barriers such as uncertain permitting processes; investment environment barriers such as lack of liquid financial markets; and bankability barriers such as off-taker creditworthiness and high debt costs.

This paper is part of The State of Climate Finance in Africa series from Climate Policy Initiative, The Children’s Investment Fund Foundation, and FSD Africa. The Landscape of Climate Finance in Africa report will be published later this summer.

World-first stress test shows African financial institutions are unprepared for nature-related risk

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23 June 2022, Nairobi: A new report from Vivid Economics by McKinsey and the UK-funded financial sector development agency FSD Africa underlines the importance for financial institutions to unlock the potential benefits of investing in businesses that protect and grow nature.

Applying first-of-its-kind analysis to three private banks and the financial systems of Zambia, Egypt, Ghana, Mauritius, Kenya, and South Africa, the report shows that for the most exposed lending portfolios, for example, in Zambia and Ghana, nature-related risks in agriculture and extractives could almost double expected losses by 2030, wiping $millions off the value of their loan books. These nature-related risks are comparable with climate-related risks seen in similar sectors.

The impacts of shifting to a nature-positive society are material and already underway. There is a significant upside to be captured but financial institutions must institute new approaches to portfolio management that get ahead of changing regulation – of consumer preferences, and of the huge economic damage threatened by tipping points in critical natural systems.
Mark Napier, CEO – FSD Africa

What financial services would you need if you found yourself as a refugee?

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I often find it difficult for most people to relate to refugees. We seem to forget that we can be in the same situation depending on the circumstances around us. The happenings in Ukraine have shown just how delicate our stability status is, and that we can quickly be turned into forcibly displaced people overnight!

While conflict, war or persecution have been traditionally viewed as the main forces giving rise to refugees, natural disasters triggered by climate change among others are fast becoming a force to reckon with. The number of forcibly displaced people has now surpassed 100 million for the first time, fueled by the war in Ukraine and other ongoing conflicts around the globe.

This takes me back to a scenario in June 2018 when FSD Africa, FSD Uganda and BFA Global were conducting a design sprint with 6 Ugandan financial service providers (FSPs), to develop new ideas for financial products and services for refugees in the country. The 4-day event reached a phenomenal breakthrough when one of the participants posed: “What if something happened and we found ourselves in another country as refugees? What financial services would we need?” Those two questions opened the minds of the participants and ideas started flooding in. The design sprint was one of the 4 steps that FSD Africa has been following to develop financial inclusion for refugees (FI4R) projects. The other 3 are:

  1. Market assessments that capture the financial lives of refugees and show the potential of serving these populations.
  2. Innovation competitions where FSPs are invited to pitch ideas of how they would address refugee financial needs
  3. Financial support and technical assistance to FSPs to develop, pilot and roll-out financial solutions.

In Uganda, working with FSD Uganda, we identified Equity Bank Uganda Limited, VisionFund Uganda and Rural Finance Initiative to offer financial services in various refugee settlements from October 2019. While the project concluded in March 2022, these FSPs have continued operations as this turned out to be a viable business for them. The project engaged BFA Global as the learning and research partner. They undertook a baseline study in January 2020 and a series of 4 financial diaries (linked below) – capturing the financial needs and uses of refugee households.

The 4 financial diaries:

They then carried out an endline study in November 2021. The partners achieved the following results:

  • Over 26,300 customers accessed loans, with 73% being female
  • Cumulative loans amounted to £9 million ($2.7million)
  • 262 bank agents were recruited across the settlements, 15% of which were women
  • Over 93,300 households registered on Equity Bank Uganda’s digital platform
  • 65,484 households receiving digital payments as of March 2022.
  • The bank made payments worth UGX 10.8 Bn (£2.2m) during the first quarter of 2022
  • 8 humanitarian agencies used the Equity Bank Uganda platform for disbursements

Below is a summary of some of the different financial services offered by the FSPs:

Based on the end-line study findings, there is still work to be done to improve financial services for refugees in the following areas:

 

New partnerships to enhance Egypt’s financial market

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Enhancing Egypt’s efforts on ESG, strengthening local and regional insurance businesses and supporting investments towards innovation for climate resilience.

Egypt’s financial market is set to benefit from announcements made by the UK government in partnership with FSD Africa in enhancing activities aligned to decarbonisation, resilience, and natural capital.

Through a series of stakeholder engagements and high-level meetings with leading institutions and policymakers, the partners identified and committed to supporting Egypt’s efforts in climate risk management and human development by paying special attention to the country’s vulnerable populations.

Since 2016, Egypt has undertaken a series of reforms aimed at strengthening the local economy and attracting foreign investments. These reforms have helped the economy avoid many of the adverse impacts of the Covid-19 pandemic. As the Egyptian economy looks to recover and respond to new challenges, including the economic impact of the war in Uk initiatives such as those announced this week will further boost national efforts for building a more resilient economy.

Key highlights of the engagements include:

Support towards innovation for climate resilience

Egyptian-based tech start-up Baramoda won a Fintech x Climate Resilience Startup challenge. The challenge sought to identify solutions working to improve the resilience of climate-vulnerable communities in Africa.

Baramoda’s solution focused on maximizing the efficiency of agri-waste management by addressing soil pollution and agricultural waste. Baramoda innovates organic soil improvers and fertilizers from different types of agricultural waste. This tailored compost is made from organic and natural components for the health of Egyptian land.

Recently, FSD Africa announced similar support for Africa-focused fintech startups with solutions that enable climate resilience in the most vulnerable communities.

FSD Africa also participated in an eye-opening investor roundtle with leading Egyptian venture capitalists hosted by the American University in Cairo (AUC) Venture Lab discussing Climate Resilience solutions.

Sign-up for The Nairobi Declaration

FSD Africa recognises the contribution insurers can make to climate change and in producing better outcomes for the continent. To this end, the organisation has urged Egypt-based stakeholders to commit to the Nairobi Declaration on Sustainable Insurance as a first step toward creating a sustainable insurance industry and building resilience for the continent.

The partners have stressed the importance of all businesses across Africa in engaging with the net-zero ambitions, agreeing that by playing its role, the insurance industry will be critical in building a sustainable environment for the future.

MoU with the Egyptian Financial Regulatory Authority to advance the implementation of ESG principles in North Africa

FSD Africa is in advanced discussion with the Egyptian Financial Regulatory Authority (FRA) to jointly drive the integration of ESG principles across the insurance sector in Egypt. Through the MoU, FSD Africa and the FRA will directly engage with local insurers and, in due course, work together to deliver the Africa Climate Finance Leadership Course in North Africa.

The Africa Climate Finance Leadership Course will enhance the capacity of regional policymakers, regulators, academia, and financial market participants to support climate-related projects. The training will also provide guidance for these regional actors to access climate funds from global sources and fast-track capital mobilization for climate projects across North Africa.

FSD Africa is committed to working with regulators and government agencies to identify, mitigate and manage climate risks and opportunities. Through our new partnerships, Egypt and its neighbouring countries will have an opportunity to significantly address the risks of climate change and accelerate the transition to a high-potential green economy.
Mark Napier, CEO – FSD Africa

FSD Africa Investments commits £8m to finance a new class of asset allocators in Africa

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Tapping the capabilities of Africa’s emerging class of capital managers to address a systemic gap in finance for small and growing businesses

Nairobi: 9 June 2022

Our investment arm, FSD Africa Investments (FSDAi), has announced an £8 million investment to support a new class of investors who are financing Africa’s small businesses and consider gender equity a key driver of financial performance.

In partnership with the Collaborative for Frontier Finance (CFF), and the Facility Manager, a Joint Venture of Cardano Development and Total Impact Capital Europe, FSDAi will provide the critical anchor funding for a new special purpose vehicle, Nyala Venture.

Nyala Venture will bridge the funding gap left by other institutions, by targeting a new class of capital providers serving small and growing businesses, particularly those which are led by women or are applying a gender lens investment strategy in Nigeria, Ghana, Kenya, Senegal, South Africa, and Uganda.

This new class of asset managers have better networks and embedded boots on the ground, enabling them to play a huge role in supporting and growing local businesses. Our support to them is part of our journey to discovering new investment avenues through which we could impact the overlooked but critical sectors of Africa’s economy and tap into the opportunity presented by women as investors and founders.
Anne-Marie Chidzero – Chief Investment Officer, FSD Africa

Leading financial institutions partner with UNECA and FSD Africa to form the African Natural Capital Alliance

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The new alliance aims to coordinate policies and practices at financial institutions, companies, regulators and policymakers toward the growth and protection of Africa’s natural resources

Nairobi: 8th June 2022 

A group of leading financial institutions from across Africa has come together with Ghana’s Ministry of Environment, Science, Technology & Innovation (MESTI), and the UK-funded financial sector development agency FSD Africa as founding members of the African Natural Capital Alliance (ANCA).

The alliance, in partnership with the United Nations Economic Commission for Africa (UNECA), will act as an African-led collaborative forum for mobilizing the financial community’s response to nature-related risks and opportunities across the continent. The ultimate aim of ANCA is to help grow and protect Africa’s natural capital by shifting financial flows from destructive activities for short-term gain to long-term stewardship of nature for sustainable economic growth.

Among the founding members are Access Bank, the Development Bank of Southern Africa (DBSA), Ecobank, Equity Bank, FirstRand, Investec, Sanlam, Standard Chartered and Zanaco. FSD Africa is acting as coordinator for the alliance with global management consultancy Oliver Wyman acting as execution and knowledge partner. The Cambridge Institute for Sustainability Leadership (CISL) is also joining ANCA as a knowledge partner while initial support for the alliance is being provided by UNECA and the United Kingdom’s Department for Environment, Food & Rural Affairs (DEFRA).

ANCA is also working with the Taskforce on Nature-related Financial Disclosures (TNFD) to provide an African voice in the development of its ‘beta’ reporting framework for nature-related risk and opportunities and is taking part in TNFD’s pilot testing programme. Announcements about other members joining ANCA from the public and private sectors are expected over the next few months.

The reliance of African nations on their rich natural capital is both a source of vulnerability and competitive advantage. The case is clear for realigning investments to deliver a nature-positive future for Africa. To achieve this, we need financial institutions, companies, regulators, and policymakers working together.
Mark Napier, CEO – FSD Africa

ANCA members will be joining with other leading figures representing the finance and policy sectors on 23rd June 2022 at a landmark event to discuss why African leadership on nature will be critical to its economic development, the economic opportunities that could be unlocked by shifting capital into nature-positive activities and the risks of inaction and continued nature destruction.

The event will also be the first chance to hear the results of a major study by Vivid Economics and FSD Africa for ANCA which, for the first time ever, quantifies how nature-related opportunities and risks could impact the value of African financial institution portfolios.

Click here to register by June 21st.

Extending financial services to refugees in Rwanda with Equity Bank

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The pilot project aims to give 100,000 refugees in Rwanda access to financial services through mobile phones.

Together with Equity Bank Rwanda PLC, we have just launched in the field a Financial Inclusion for refugees (FI4R) programme that aims to provide financial services to over 90,000 refugees in Rwanda.

Through this programme, refugees will be able to access mobile banking & agency banking services like opening accounts, receiving, and sending money, saving, digital loans, insurance and others through unstructured service data (USSD) channels. Furthermore, the project will provide financial literacy training to equip the refugees with knowledge on how to manage their finances.

The need to extend financial services to vulnerable groups like refugees, cannot be understated. With easier access to financial services and knowledge of how to manage their personal and business finances, refugees across Rwanda will be able to transact safely and with ease. Access to and usage of financial services can allow low-income households, including refugees, to build assets, mitigate shocks, increase resilience, and contribute to the local economy.

The project builds on earlier work funded by FSD Africa and Access to Finance Rwanda (AFR) in partnership with UNHCR following a market assessment done by BFA Global that outlined refugees financial needs and provided a business case for financial institutions to serve them. It also identified barriers refugees face when accessing financial services and offered solutions to overcoming them.

The project was officially launched in Mahama Refugee Camp in Kirehe District, Eastern Province. Mahama Refugee Camp is the largest refugee camp in Rwanda, hosting over 47,000 refugees from Democratic Republic of Congo, Burundi and several other neighbouring countries.

Refugees have financial and other needs like everybody else. It is therefore imperative for the financial sector to serve them just as they would anybody else. Refugees are engaged in economic activities, have incomes and spend; the financial system should facilitate such activities.
Kuria Wanjau, Programme Manager for Fragile Communities and States

There are plans to expand the project to refugee populations in Uganda and the Democratic Republic of the Congo.

Ethiopia’s financial markets receive boost from UK-aid via FSD Afri

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The launch of FSD Ethiopia and partnerships with Ethiopia Investments Holding will enhance efforts to deliver beneficial development and financial outcomes for a stronger more resilient national economy.

Ethiopia’s financial markets have been boosted by a series of announcements and commitments by Financial Sector Deepening (FSD) Africa, a specialist development agency working to strengthen financial markets across sub-Saharan Africa.

The announcements were made as part of a week-long visit led by senior leaders from the UK-Aid funded agency in collaboration with partners. These included the Ethiopia Ministry of Finance, Ethiopia Investments Holding, National Bank of Ethiopia, and the UN Environment Programme’s Principles for Sustainable Insurance Initiative (PSI).

From progress in establishing a securities exchange to launching FSD Ethiopia and solutions to help the country’s insurance industry respond to climate change, the initiatives will enhance the strength and health of Ethiopia’s f markets, building the foundations for a stronger more resilient national economy.

18th May – Establishment of the Ethiopia Securities Exchange: Ethiopia’s Ministry of Finance, the Ethiopian Investment Holdings and FSD Africa signed a cooperation agreement to establish the Ethiopian Securities Exchange (ESX). Once established, the ESX will become the 30th exchange on the continent. At least 50 companies, including banks and insurance companies, are expected to list at the launch of the exchange.

18th May – Investors RoundTable: Our investment arm, FSD Africa Investments held an investments roundtable in Addis introducing its work as a provider of early-stage, risk-bearing capital and as a catalytic investor, seeking to drive innovative models and products that can address gaps in Africa’s financial market.

19th May – Launch of FSD Ethiopia, which will work to enable the development of the country’s financial sector. With funding from UKAID and the Bill and Melinda Gates Foundation, FSD Ethiopia will build on FSD Africa’s initial efforts to enhance the country’s financial sector.

20th May – Ethiopian insurers endorse Nairobi Declaration on Sustainable Insurance: Insurance stakeholders in Ethiopia have thrown their support behind the Nairobi Declaration on Sustainable Insurance. The Nairobi Declaration on Sustainable Insurance is a continental commitment by African insurance industry leaders to support the achievement of the SDGs. The Nairobi Declaration brings together local and international insurance firms to promote the achievement of SDGs and make it easier for them to understand the commitment to support the achievement of the SDGs.

We are pleased to be collaborating with the Government of Ethiopia in this historic initiative that will accelerate the development of capital markets in Eth Our assistance for establishing the Ethiopian Securities Exchange will leverage FSD Africa’s vast expertise and experience in developing capital markets infrastructure across Africa.
Mark Napier, CEO