Author: TIMOTHYRADIER

Kenya’s corporate bond market depressed – agency

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In Summary

  • The Capital Markets Authority (CMA) has attributed the drop to slower economic growth, insufficient investment growth and macroeconomic instability.
  • Financial Sector Deepening Africa (FSD Africa) has however singled out readily available bank loans and disclosure issues as a major challenge.

Private firms and major corporates are not tapping opportunities in Kenya’s bond market, according to a financial markets agency.

This, it says, notwithstanding huge opportunities mainly in climate-friendly investments.

Financial Sector Deepening Africa (FSD Africa) cites readily available bank loans and avoidance of disclosures by private entities as the main drawbacks in issuance of corporate bonds

A corporate bond is a fixed income instruments issued by a company in order to raise capital.

The corporate bond market in Kenya enables companies’ access long-term capital at competitive rates, enhancing their growth and development.

Latest Nairobi Securities Exchange barometer shows bonds turnover recorded a 47.17 per cent decline in April, from Sh70.66 billion in March 2023, to Sh37.33 billion.

In the first quarter of the year, turnover fell 14.9 percent year-on-year with investors trading bonds worth Sh162.51 billion in the period, down from Sh190.9 billion in the first quarter of last year.

The Capital Markets Authority (CMA) has attributed the drop to slower economic growth, insufficient investment growth and macroeconomic instability.

“Most issuers don’t want to disclose, because when you come to the market with a corporate bond, the idea is you get less stringent requirements but in exchange for that, you offer to become more transparent,” director of capital markets Evans Osano said.

He spoke during a round table in Nairobi on Wednesday which brought together capital market stakeholders including potential issuers in both banking and non-banking sectors, intermediaries, fund managers and other sector players.

There have been little activities in the bond market in recent years despite their ability to raise long-term capital at affordable rates to fund growth.

Corporate bonds are less risky and less volatile compared to other asset classes.

Recent activities include the Kenya Mortgage Refinancing Company’s seven-year tap issue and Kenya’s first green bond by Acorn Holdings Limited.

The Sh5.7 billion green bond programme, partially guaranteed by GuarantCo, was cross-listed on the International Securities Market (ISM) of the London Stock Exchange, and at the Nairobi Securities Exchange (NSE) in 2020.

Others were East African Breweries five-year fixed-rate instrument floated in 2021 to repay debt with a maturity date of October 2026, Family Bank’s five and a half-year bond floated on 2021, and Centum Investment’s bond floated in 2020 with a maturity date of this December.

“The process of going to the market, including approvals and listing is discouraging some of the potential issuers. We have to make the process as seamless and cost effective as possible so that it is not a barrier or excuse for not coming to the market,” Osano said.

Data analysis and financial expert Mihr Thakar however notes rising interest rates have lead to losses for existing bond holders.

“New buyers from the secondary market will bid in a way that would result in losses for sellers of the older securities. A standoff between buyers and sellers results in lower bond turnover at exchange,” Thakar told the Star yesterday.

FSD Africa called for tapping into green investment bonds in the country saying they provide a huge opportunity.

Some of the potential sectors include built environment, ICT, telecommunication, agriculture (climate smart), green manufacturing and carbon markets.

Fund managers, who are said to be conservative, need to switch from looking at risk returns towards green opportunities, the agency notes.

The outstanding corporate bonds in Kenya are 0.2 per cent of GDP, of which 99 per cent is from banks and a mere one per cent from corporate bonds.

CMA has since committed to accelerate growth of the capital markets.

“The Capital Markets Authority will continue to develop and enhance its regulations to support and accelerate the growth path of Kenya’s capital market enhancing mobilization of domestic resources and international capital in Kenya through the NSE,” chairman Nicholas Nesbitt notes.

Regulations for insurance sandbox to deepen innovation, financial inclusion in Nigeria

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May 17th, 2023, Lagos – In a strategic move to deepen insurance penetration and financial inclusion through innovation in Nigeria, the National Insurance Commission (NAICOM) has released the insurance regulatory sandbox operational guidelines.

The guidelines are designed to determine insurance solicitation or distribution within the insurance value chain, facilitate insurance products; underwriting; policy & claims servicing, etc., before making them public.

The Insurance Regulatory Sandbox Operational Guidelines include Market Conduct Guidelines for Takaful and Retakaful Insurance Operators and Enterprise Risk Management Framework for Takaful and Retakaful Operators in Nigeria.

Takaful Insurance is generally based on the concept that the negative impact of a specific incident is distributed among a group of persons instead of making the person who experienced the loss bear its results alone. The means to achieve this is to establish a common fund to which everyone exposed to a specific risk may contribute in such a way that indemnity will be paid from that fund.

Retakaful is the Islamic alternative to conventional reinsurance and operates on Shariah principles. It is a way for a primary insurer to protect against unforeseen or extraordinary losses.

FSD Africa supported by the UK government has been providing technical support to NAICOM to enhance its ability to fulfill its development, regulation, and supervision mandate to support market development, market stability promoting innovation, and protection of policyholders in line with international standards.

The launch of the regulatory sandbox is part of the NAICOM’s strategic objective to drive innovation of products and services, and ensure operators are professional in the conduct of their businesses and in line with best practices.

Commenting on the launch of the regulatory sandbox:

British Deputy High Commissioner in Lagos, Ben Llewellyn-Jones said:

“Insurance remains a critical tool in building the resilience of businesses, livelihoods, and households globally. With the persistence of climate risks / disasters and fluctuating economic realities in Nigeria, it is more important for the insurance industry to leverage innovation to develop more contextualised products and services that would mitigate the risks for Nigerians and their businesses.

“The UK government is keen to see this innovation delivered in consultation with the insurance industry and regulators to maximise the usefulness and impact of this tool.”

Director, Risk and Resilience, FSD Africa, Kelvin Massingham said:

“It is vital for NAICOM to balance the need to facilitate and promote innovation with the protection of consumers and the adequate management of the risks that may arise. Support on market development focusing on regulating for innovation, will establish an environment that responds to innovation and market changes on an ongoing basis by building internal capacity, instruments and re-shaping their engagement with the private sector to foster a culture of innovation, learning and testing innovations.”

Another guideline released last week by NAICOM was the Enterprise Risk Management (ERM) Framework which is intended to establish minimum Risk Management Standards for Takaful Insurance Operators (TIOs) in Nigeria.

Under this guideline, all Takaful Insurance undertaking will henceforth establish and maintain a sound ERM Framework to support the adequacy of its solvency and comply with all relevant Sharia rules and principles.

This framework is expected to be “comprehensive in nature, dealing with all reasonably foreseeable and relevant material risks of the funds making up the Takaful Undertaking, and shall be formalized through a set of policies, consistently applied, the TIO’s approach to determining the appetite for risk, its process for managing risks and its Governance related to risk.

African startups need more than just funds from their investors

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At a business breakfast last week, FSD Africa and the Financial Sector Conduct Authority issued a call to action 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 Financial Sector Conduct Authority (FSCA) plans to host stakeholder engagements and public workshops with the aim of releasing a Final Sustainable Finance Roadmap during the course of this year. It is estimated that South Africa holds 70% of the African insurance industry’s market premiums.

Formally launched in April 2021, the Nairobi Declaration on Sustainable Insurance (NDSI) is a declaration of commitment by African insurance industry leaders to support the achievement of the UN Sustainable Development Goals (SDGs).

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African startups need more than just funds from their investors

Posted on by TIMOTHYRADIER

At a business breakfast last week, FSD Africa and the Financial Sector Conduct Authority issued a call to action 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 Financial Sector Conduct Authority (FSCA) plans to host stakeholder engagements and public workshops with the aim of releasing a Final Sustainable Finance Roadmap during the course of this year. It is estimated that South Africa holds 70% of the African insurance industry’s market premiums.

Formally launched in April 2021, the Nairobi Declaration on Sustainable Insurance (NDSI) is a declaration of commitment by African insurance industry leaders to support the achievement of the UN Sustainable Development Goals (SDGs).

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South African insurance stakeholders commit to sustainable insurance and building a resilient economy

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May 12th, 2023, JOHANNESBURG – South African insurance stakeholders 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.

FSD Africa and the Financial Sector Conduct Authority (FSCA) held a C-Suite breakfast session with CEOs of South Africa’s Insurance Industry and Regulators with a call to action 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 event was an opportunity to cover the risks, challenges and opportunities facing the South African insurance industry in adapting to and mitigating climate change and responding to broader sustainability objectives. The session highlighted key considerations for South African insurance market players to enhance the resilience of the South African economy and have a responsive sector primed for contributing toward a more sustainable future. It is estimated that South Africa holds 70% of the African insurance industry’s market premiums1. As investors and stewards of significant financial resources, the sector must consider the role they play on the continent in driving sustainability objectives.

Formally launched in April 2021, the Nairobi Declaration on Sustainable Insurance (NDSI) is a declaration of commitment by African insurance industry leaders to support the achievement of the UN Sustainable Development Goals (SDGs). The Declaration was first unveiled in Nairobi, Kenya, at the UN Environment Programme’s Principles for Sustainable Insurance (PSI) initiative 4th Africa summit – hosted by ICEA LION Group as a founding signatory – and momentum continues to build.

With backing from more than ten inaugural signatories, the Declaration brings together senior leaders to accelerate solutions to a set of major sustainability challenges – ranging from climate change and ecosystem degradation to poverty and social inequality – that have assumed even greater urgency in a post-Covid-19 world. Currently, 102 organisations across the continent have signed up to the declaration.

Since its launch, FSD Africa has supported the Declaration through a series of events and thought leadership engagements as it encourages more institutions to sign up. The first in a series of planned C-Suite meetings was hosted in Lagos, Nigeria, in March 2022 by UNEP, FSD Africa and the National Insurance Commission (NAICOM) of Nigeria. Other C-Suite events have been held in Cairo, Egypt, Nairobi, Kenya and Addis Ababa, Ethiopia.

Speaking during the event, Kelvin Massingham, Director, Risk and Resilience, FSD Africa said: “Mainstreaming resilience into Africa’s economic development is essential to secure future prosperity and sustainable growth. Now is the time for the African insurance sector to play the significant role it should in creating this resilience. The Nairobi Declaration on Sustainable Insurance’s proactive and market-based approach is exactly what we need, and the commitment today is a strong statement to work together towards an African-led solution.”

Unathi Kamlana, Commissioner, Financial Sector Conduct Authority said” The financial sector is fundamental as an allocator of capital within an economy. We will continue working collaboratively with stakeholders, in South Africa and more broadly, to ensure that our sector is efficiently and effectively able to intermediate and direct capital flows in support of sustainable outcomes, while appropriately pricing for risks and promoting investor confidence.”

Anthony Phillipson, British High Commissioner to South Africa, said: “The financial sector has a key role to play in delivering our climate commitments. I am happy to see that sustainable finance is fast becoming a cornerstone of our UK-South Africa green partnership. I particularly welcome collaboration to strengthen capacities and embed sustainable practices across the insurance and pension industries in South Africa.”

GVCA hosts maiden conference to leverage Private Equity for Ghana’s economic recovery

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The Ghana Venture Capital and Private Equity Association (GVCA) has held its maiden conference at the Marriott Hotel in Accra.

The conference was a platform to illuminate Private Equity as a catalyst for the recovery of Ghana’s economy.

Capital owners including pension trustees, insurance companies, asset managers as well as members of the association explored the full spectrum of private capital models.

Speaking on the sidelines of the conference, Matthew Boadi Adjei, Board Chair of the GVCA and CEO of Oasis Capital, emphasised the potential of private equity in providing patient and long-term capital to SMEs in Ghana.

With his extensive experience in private equity, he notes that “private equity can help SMEs set up proper management structures and governance, navigate pervasive risks, and provide sustainable jobs, while intentionally pursuing a double bottom line – providing returns for investors and fostering sustainable job creation”

“Despite the economic challenges faced by the country, private equity can provide an alternative option for investment, leading to inclusive and innovative solutions to navigate the storm,” Mr. Adjei added.

Hamdiya Ismaila, General Manager of Venture Capital Trust Fund and a member of the GVCA also stated: “The GVCA’s goal for 2023 is to build the capacity of emerging managers to ensure that there are enough managers to mobilize and invest capital, supporting SMEs that create jobs and livelihoods for Ghanaians.”

The fund is looking to deploy a commitment of about 200 million Ghana cedis towards this goal.

Members of the association called for the implementation of a Limited Partnership Act that would support the development of the private equity/venture capital industry, which is currently limited under the Companies Act.

On her part, Mirabelle Moreaux, Partner at Injaro Investments Limited and a member of GVCA alluded that Investor comfort with regulations and trends is critical for attracting capital into Ghana’s private equity industry.

She said the GVCA conference is a unique opportunity for businesses, investors, and fund managers to connect, explore and dialogue on how to tap into private capital, a critical source of financing in an emerging market like Ghana where the capital markets are not deep and traditional debt financing is expensive.

“It is our firm belief that at the end of the conference, members will walk away with innovative financial solutions for small and medium enterprises. These solutions will provide the government with additional taxes, the investors with financial and social returns and ultimately aid in the development of Ghana’s real economy.”

The two-day GCVA conference 2023 brought together nearly 200 members from across Africa and was under the theme “Leveraging Private Equity for Ghana’s Economic Recovery”

The conference 2023 featured expert panel discussions, PE/VC case studies, project launches, research paper presentations, training sessions, and deal room sessions.

Two panel sessions explored “how private equity fund managers create value for investors” and “the role of domestic institutional investors in building a resilient economy.” Other discussions also focused on alternative models for deploying and measuring the impact of private capital in Ghana.

This year’s conference was sponsored by FSD Africa, Ghana Venture Capital Trust Fund, British International Investments (BII), Mastercard Foundation Africa Growth Fund, Axis Pensions Trust Ltd, Stanbic Investment Management Services, Impact Investing Ghana, Citi FM and SoftTribe.

Other sponsors include Oasis Capital Ltd, Mirepa Investment Advisors Ltd, and Injaro Investments Limited.

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Swiss Firm Partners With Local Insurers To Build Low – Cost Health Products For Local Communities

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NAIROBI, Kenya, April 27 – Swiss Capacity Building Facility (SCBF) and APA Insurance have partnered with a consortium of local insurance innovators to provide affordable primary healthcare insurance solutions to under-served Kenyans.

The innovators include Paa Insurance Agency; an inclusive insurance distribution specialist, Emerging Markets; a research and design consultancy firm, Ilara Health; a network of primary healthcare facilities and Democrance; a SaaS plug-and-play insurance technology provider.

The partners have developed an innovative solution designed with a hybrid model of capitation costs, and in-patient benefit for patients who become hospitalised.

“We are proud to launch this innovative initiative which will see thousands of under-served households in rural and peri-urban Kenya have access to sustainable primary health care financing solutions to protect their families against out-of-pocket expenses that could otherwise force them into poverty,” said Dana Ellis, Senior Operations Manager at SCBF.

The technical assistance funding from SCBF will contribute to strengthening financial inclusion and increasing resilience against primary healthcare costs for under-served communities in Kenya, intending to reach at least 50 per cent of women.

This is aligned to the Government of Kenya’s 2030 financial inclusion strategy to ensure that no person in Kenya is left out of reach of financial services, to increase their resilience against risks beyond their control, while also improving their access to essential healthcare services.

Speaking at the launch of the project , APA Group CEO Ashok Shah noted that, “it is important for insurers to think beyond offering insurance to the affluent customer segment.”

He emphasised that the future of insurance lies in tapping into the majority of the population which remains uninsured.

APA has been at the forefront of supporting inclusive insurance solutions targeting the middle and lower base of the economic pyramid, and shall continue to do so with this initiative, to create social and sustainable impact within the communities.

The demand for new innovative insurance solutions, over the last few years, has seen an emergence of insurtechs (insurance innovators who use technology to create and improve insurance solutions) and simplified customer experiences facilitating the purchase, service and making of claims without the barriers associated with mainstream insurance.

This proliferation has particularly been fueled by the regulator-backed programme, BimaLab, in partnership with Financial Sector Deepening Africa (FSD Africa).

BimaLab is an accelerator program that supports early insurtech innovators to develop innovative insurance solutions.

Elias Omondi, Senior Manager Risk Regulation at FSD Africa, who inspired the birth of BimaLab remarked, “We’re thrilled to see startups that have gone through BimaLab launch innovative products that will redefine how insurance is offered and accessed in the Kenyan market, and even beyond our borders. We will work closely with the innovators, the insurer and the regulator to see that the project achieves its intended impact.”

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APA links with innovators to create low cost insurance products

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In Summary

  • Kenya plans to push its health insurance penetration to 45% by 2030 from the current 22%.
  • Overall, Kenya’s three percent insurance penetration is the third lowest in Sub-Saharan Africa with South Africa leading at 17 percent.

Swiss Capacity Building Facility (SCBF) and APA Insurance have partnered with a consortium of local insurance innovators to build low-cost health insurance.

The partnership seeks to provide affordable and relevant primary healthcare insurance solutions to under-served Kenyans.

Kenya plans to push its health insurance penetration to 45 per cent by 2030.

Overall,  Kenya’s three per cent insurance penetration is the third lowest in Sub-Saharan Africa with South Africa leading at 17 per cent.

This is due to most of Kenya’s population perceiving insurance as a “nice-to-have/easy to discard” product rather than one that is essential.

It is an innovative solution designed with a hybrid model of capitation costs and in-patient benefits for patients who become hospitalised.

“We are proud to launch this innovative initiative which will see thousands of under-served households in rural and peri-urban Kenya have access to sustainable primary health care financing solutions,” Dana Ellis, senior operations manager at SCBF said.

The technical assistance funding from SCBF will contribute to strengthening financial inclusion and increasing resilience against primary healthcare costs for under-served communities in Kenya, intending to reach at least 50 per cent of women.

This is aligned with the Government of Kenya’s 2030 financial inclusion strategy to ensure that no person in Kenya is left out of reach of financial services.

Speaking at the launch, APA Group CEO Ashok Shah said it is important for insurers to think beyond offering insurance to the affluent customer segment.

“The future of insurance lies in tapping into the majority of the population which remains uninsured. APA has been at the forefront of supporting inclusive insurance solutions targeting the middle and lower base of the economic pyramid,” Ashok.

The demand for new innovative insurance solutions, over the last few years, has seen an emergence of insurtech and simplified customer experiences facilitating the purchase, service and making of claims without the barriers associated with mainstream insurance.

This proliferation has particularly been fuelled by the regulator-backed programme, BimaLab, in partnership with Financial Sector Deepening Africa (FSD Africa).

BimaLab is an accelerator programme that supports early insurtech innovators to develop innovative insurance solutions.

Elias Omondi, senior manager of risk regulation at FSD Africa says they are thrilled to see startups that have gone through BimaLab launch innovative products that will redefine how insurance is offered in the Kenya market and even beyond our borders.

“We feel honoured to have been selected to offer local support and monitoring mandate by SCBF. We will work closely with the innovators, the insurer and the regulator to see that the project achieves its intended impact.”

The project will enable three BimaLab participants, Paa Insurance Agency, Emerging Markets and Democrance, supported by Illara Health, to build cutting-edge solutions for a market that continues to be neglected by mainstream insurance providers.

“The project will enable us to refine and scale inclusive insurance solutions that we have been developing since our participation in BimaLab,” Omondi said.

Health insurance has been considered as key to achieving universal health care by various countries.

This is with the aim of ensuring that every citizen should have access to needed healthcare services that are effective and of acceptable quality and that no one should risk financial ruin as a result of illness.

However, recent statistics still indicate that in Kenya, currently, 26.6 per cent of total health expenditure is out of pocket.

Out-of-pocket spending on healthcare has been found to drive the poor into more poverty and poses a barrier to their access to healthcare.

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The African Green Bank initiative provides $1.6 million to support the first Green Finance Facilities in Africa

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( AfDB) – The African Development Bank has launched the African Green Bank Initiative to tackle Africa’s key barriers to climate financing and promote resilient, green and sustainable growth.

The Green Bank Initiative will be supported by the African Green Finance Facility Fund (AG3F), which aims at developing an ecosystem of local and regional Green Finance Facilities to mobilize private investment in support of climate transition. AG3F promotes the deployment of the Green Bank Model throughout the continent. To ensure rapid deployment, AG3F will partner with existing local financial institutions and leverage on their network, financing capacity and experienced staff.

For its pilot phase, AG3F aims at mobilizing $10 million for the technical assistance, of which $1.6 million have already been secured, and $90 million to support the capitalization of the first Green Finance Facilities. Contributors will include donor countries, multilateral development banks, development finance institutions (DFI), climate funds and philanthropic or impact investors. First beneficiaries include Banque Nationale d’Investissement de Côte d’Ivoire and Caisse des Dépôts et Consignations du Bénin, which will develop pipelines of clean energy, resilient infrastructures or smart agriculture projects.

Green Finance Facilities will support small and medium-sized enterprises (SMEs) and local communities by offering direct access to climate finance. The initiative will help African countries implement Nationally Determined Contributions (NDCs), as investment needs are estimated at $2.8 trillion by 2030 and funds invested on the continent still represent a limited share of global green finance flows.

AG3F will benefit from best practices and support of strategic partners for the creation, financing and deployment of Green Banks. These partners have built an international reputation in the area of climate finance and include the leading European asset manager Amundi, the knowledge platform Green Bank Network, the leading multilateral fund Climate Investment Funds (CIF) and Canada’s Climate Action in Africa project.

Audrey-Cynthia Yamadjako, co-ordinator of the Green Bank initiative, welcomed the onboarding of those partners in the AG3F projects: “We are delighted to start the work with our partners in the pilot phase of AG3F. We will benefit from their technical knowledge, investment vehicles and funding capacity to create the first African Green Finance Facilities”.

According to African Development Bank Vice President for Private Sector, Infrastructure and Industrialization,Solomon Quaynor, “technical assistance will enhance Green Finance Facilities’ green project management and governance and is therefore key to attract private capital by entrenching long-term investor confidence.” Technical assistance will be needed to create Green Finance Facilities and build up their technical capacities, including by implementing monitoring, risk evaluation and reporting tools and structuring a bankable pipeline of green projects.

Upon launch of the African Green Bank Initiative at the UN Climate Change Conference (COP27) in Egypt in November 2022, African Development Bank Vice President for Energy, Power, Climate and Green Growth, Kevin Kariuki highlighted that the initiative was a key stepping stone to meet Sharm El Sheikh implementation plan.

“The Green Bank Initiative is a powerful tool for reducing financing costs and mobilizing private sector investments in climate action in Africa,” Kariuki said. He said multilateral development banks and international financial institutions had a crucial role in enabling local financial institutions to develop a green pipeline of sustainable and “Paris-aligned” projects.

The initiative is part of the African Financial Alliance on Climate Change (AFAC). Akinwumi Adesina, President of the African Development Bank Group, explained as part of AFAC that mobilizing the financial sector will be key to address climate change in Africa: “Africa’s financial actors need to work together creatively to mobilize global financial resources at scale that can support local innovation, and that drive climate-resilient and low-carbon development on the continent”.

About the African Development Bank Group

As Africa’s premier development finance institution, African Development Bank (AfDB) objective is to spur sustainable economic development and social progress in African countries, thus contributing to poverty reduction. AfDB’s strategy for 2013-2022 focuses on two objectives: improving the quality of Africa’s growth and the transition to green growth.

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