Category: News

Ethiopian Securities Exchange Invites Investors to Become Stakeholders

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The Ethiopian Securities Exchange has started its Capital Roadshow aiming to attract actors in the financial sector into buying shares and becoming stakeholders of ESX. It also announced that it would commence issuing licenses to capital brokers, dealers, and advisors in September this year.

Foreign and domestic investors can purchase 75% of the shares of ESX while the rest of the ownership goes to the Ethiopian Government through Ethiopian Investment Holdings. It is expected that ESX will become fully operational as of January next year.

It is to be recalled that the National Bank of Ethiopia (NBE) announced in May 2022 that three well known global companies were desirous to participate in ESX. Financial Deepening Africa (FSD Africa) has already signed an agreement to become a shareholder in the securities exchange. According to NBE, IFC has also shown an interest to participate in the securities exchange.

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Holland firm to offer corporate debt guarantees

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Holland-based fund manager Cardano Development has announced plans to establish a corporate debt guarantee company in Kenya to help firms raise funds from the capital markets.

The credit guarantee company set to be operational by year-end seeks to offer up to a 100 percent guarantee covering debt interest and principal for local currency capital market senior debt in the green (environmentally friendly) space.

Investors in Kenya’s corporate bonds have been relying on insurers to cover the risk of default by issuers while others take no protection, betting on borrowers to service their obligations as they fall due.

Kenya’s nascent debt guarantee space has mostly focused on bank loans, especially lending to small and medium-sized companies.

Cardano’s entry comes after it launched similar firms in Nigeria and Pakistan, targeting broad sectors including public and private infrastructure, financials such as saccos and corporates mostly in the form of commercial paper.

“About a year ago we decided to engage together with InfraCo Africa, to jointly develop with the assistance of FSD Africa a Kenyan guarantor which we hope will be operational by the end of this year,” said Cardano Development chief executive Joost Zuidberg.

InfraCo Africa is a European fund while FSD Africa is a research and advocacy firm specialising in the financial sector.

The yet-to-be-named firm has raised Sh6 billion in capital provided by eight founding providers including four international development finance institutions (DFIs) and four local private investors.

Aside from Kenya, the guarantee company will cover Uganda, Tanzania, Rwanda and Zambia, aiming to reach a guaranteed portfolio of Sh50 billion within five years.

Its value proposition is in better pricing, scale and superior products owing to the fact that it will be a locally-based company empowering domestic savings.

“It is a private sector institution with ultimately the aim to completely become local, presumably even be listed in the stock exchange,” said Mr Zuidberg.

He made the remarks during a roundtable by FSD Africa themed on mobilising long-term capital for sustainable development in Kenya.

FSD Africa has provided financial and technical support in establishing guarantee companies including developing business plans, engaging with institutional investors in the market and advising on the regulatory environment.

Kenya requires $61.7 billion to meet its global commitment to climate change by 2030 with the country’s annual infrastructure financing gap currently standing at $1.8 billion.

“There is a need for risk sharing and innovation in order to enable the private sector to play its rightful role and mobilise financing at a scale that is required for Kenya’s various needs,” said FSD Africa chief executive Mark Napier.

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FMDQ Group, FSD Africa help bridge gender finance gap in Africa

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FMDQ Group Plc and Financial Sector Deepening (FSD) Africa – the Implementing Partners of the Nigerian Green Bond Market Development Programme (the Programme) – organised a two-day event in Lagos, to introduce the concept of gender bonds to key market players within the Nigeria financial markets space. The event examined the state of gender equality in Nigeria and discussed the opportunities for Nigerian issuers and investors to use gender-sensitive/intentional approaches in bridging the gender finance gap in Nigeria. Also, it afforded potential issuers an opportunity to learn from the Tanzanian experience in navigating the issuance process of a gender bond.

External shocks such as pandemics, climatic disruptions, and economic downturns, have continuously had adverse impacts on humanity, with vulnerable groups, such as women, and their businesses being badly hit. Consequently, financial market players globally, as well as in Africa, are now empowering women and expanding their access to finance and economic inclusion through a debt market instrument that seeks to support the advancement and equality of women – the gender bond. Although at its emerging stage, understanding the gender bond framework for Nigeria’s debt market can play a crucial role in supporting the efforts to attain the United Nations (UN)’s 2030 Sustainable Development Goals (SDGs) 5 and 10 – Gender Equality and Reduced Inequalities, respectively.

In attendance at the event were Ben Llewellyn-Jones OBE, Deputy High Commissioner, British Deputy High Commission, Lagos, Beatrice Eyong, United Nations Women Country Representative to Nigeria, Bola Onadele. Koko, Chief Executive Officer, FMDQ Group Plc, Ruth Zaipuna, Chief Executive Officer, NMB Bank Plc, Mary Njuguna, Principal Specialist, Capital Markets, FSD Africa, as well as other market stakeholders.

The first day featured a Breakfast Session for C-Suite Executives and highlighted the impact sustainable finance can have in driving women’s economic empowerment, as well as increased participants’ knowledge and awareness of gender bonds.
Welcoming participants to the event, Bola Onadele. Koko, Chief Executive Officer, of FMDQ Group Plc gave a broad overview of the Programme’s achievements from its inception in 2018 till date in the areas of policy advisory, technical support for green bond issuances, and market capacity building. He challenged everyone within their individual areas of expertise to be encouraged by the progress of the Programme as it relates to green bonds and similarly, push the envelope with gender bonds as we continue to develop and entrench the principles of sustainability in the Nigerian capital markets whilst facilitating prosperity for all.

The Breakfast Session featured a panel discussion themed, “The Role of Financial Markets in Strengthening Gender Financing in Nigeria”, with panellists including the Chief Executive Officer of NMB Bank Plc of Tanzania, a representative of British International Investment PLC, an Associate Director of PwC Nigeria, a representative of FMDQ Securities Exchange Limited, a Deputy Director of the Securities and Exchange Commission, Nigeria, and the Gender Network Manager, FSD Africa.

The panellists established the business case for investing in women-owned/led businesses, women-focused initiatives and the urgency for closing the $ 42 billion gender financing gap in Africa. Also, the panellists reiterated the importance of leveraging sustainable and innovative financial instruments such as gender bonds in financing women-owned/led businesses.

The second day presented a Masterclass which featured a deep dive into the modalities surrounding the issuance of NMB Bank Plc’s first gender bond in Tanzania (Jasiri Bond). The Treasurer of NMB Bank Plc, during his session, stirred the zeal of potential issuers to the impact of women empowerment through a gender bond as he shared the stories of the beneficiaries of the NMB Bank Plc’s Jasiri Bond.

According to Sustainalytics, a global leader in Environmental, Social and Governance (ESG) research, and a technical partner for the gender bond awareness sessions, the key steps required for a gender bond issuance include the development of a framework, disclosure of information to an external reviewer, documentation of a second opinion, development of a pre-issuance report, and annual documentation of the impact of the gender bond.

The event ended with the Implementing Partners of the Programme reiterating their commitment to support institutions willing to bridge the gender finance gap, as well as other sustainable financing gaps in Nigeria, through financial instruments like sustainable or sustainability-linked bonds that is, gender bonds, green bonds, blue bonds, social bonds, and others. The Programme was launched in 2018 to create awareness and education on green finance, whilst serving as the primary vehicle to explore and implement initiatives geared towards accelerating the development of the Nigerian Green Bond Market and supporting broader debt market reforms that impact green bonds, through its Implementing Partners, FMDQ Group and FSD Africa.

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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.

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

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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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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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