Country: Kenya

Value for money approach for the FSD network

Posted on by Kihingu Inc

Financial Sector Deepening programmes (FSDs) face increasing pressure to show that they provide value for money (VfM). This includes demonstrating that they are delivering their interventions efficiently and achieving their desired development impact. To achieve this, strengthening of internal procurement processes, as well as monitoring and results measurement (MRM) approaches, continue to be key areas of focus.

With these objectives in mind, FSD Africa commissioned the development of a new VfM approach, as a resource for the FSD Network – a group of FSD programmes including eight national programmes in Ethiopia, Kenya, Mozambique, Nigeria, Rwanda, Tanzania, Uganda, and Zambia and two regional programmes (FinMark Trust in Southern Africa, and FSD Africa).

The approach was developed by Oxford Policy Management (OPM) and Julian King & Associates, building on OPM’s approach to assessing VFM. This approach treats VfM as an evaluative question about how well resources are being used, and whether the resource use is justified. Addressing an evaluative question requires more than just indicators – it requires judgements to be made, supported by evidence and logical argument.

The VfM approach emphasises evaluative reasoning as a way to make robust judgements, transparently and on an agreed basis. It involves developing definitions of good performance and VfM, which are agreed in advance of the VfM assessment. The definitions include criteria (aspects of performance) and standards (levels of performance) developed specifically for the FSD context. Criteria and standards provide a systematic framework to ensure the VfM assessment is aligned with an FSD programme’s theory of change, collects and analyses the right evidence, draws sound conclusions, and tells a clear performance story.

FSD programmes are complex and their performance depends not just on quantitative indicators of delivery (such as number of projects completed) but also on the quality of implementation (e.g. sound adaptive management to respond to a changing environment and to act on emergent opportunities and learning). A mix of evidence is necessary to support well-informed, nuanced judgements about FSD performance and VfM.

Indicators play an important role in measuring some aspects of FSD performance. But restricting a VfM assessment to indicators alone would run the risk of missing important information about the quality of delivery and outcomes – for example, focusing on aspects of performance that are easy to measure at the expense of aspects that are important but difficult to quantify.

Therefore, the new VfM approach accommodates a mix of indicators and narrative evidence. The approach seeks to maximise use of rigorous evidence from existing MRM frameworks. It is aligned with the FSD Network’s MRM frameworncluding  Impact-Oriented Measurement  (IOM) Guidance (on how FSDs can better measure their contributions to changes in the financial markets they seek to influence), and the FSD Compendium of Indicators (setting out a common theory of change and related measurement framework that form the basis of common indicators to track FSD outcomes and impact).

The VfM approach is designed to support accountability as well as reflection, learning and performance improvement across the FSD network. It can also be used to systematically identify areas where MRM systems can be improved, to provide better evidence and benchmarking of sound resource management, delivery, outcomes and impacts.

The VfM approach is detailed in our new VfM Framework and Guide. The VfM Framework explains the conceptual design and rationale for the approach. The Guide sets out a practical, user-friendly, step-by-step approach for design, assessment and reporting on VfM. These documents will support a consistent approach to VfM assessment and reporting across the FSD Network, while retaining sufficient flexibility to reflect differences in context.

These frameworks have undergone rigorous development and testing over the past 18 months. As detailed within the documents, this has included a consultative process with FSDs and donor agencies, a staged approach to framework development with input from all FSDs, a full-day workshop with FSD MRM teams (at the FSD Conference in Livingstone, Zambia, November 2017), and piloting of the approach during 2018 with FSD Moçambique, FSD Uganda, Access to Finance Rwanda, and FSD Africa.

It is hoped that FSDs will use this comprehensive VfM assessment approach to support accountability, learning, improvement, and making investment decisions. The FSD MRM Working Group serves as an ideal community of practice to support effective and consistent application of the approach.

Using development capital to finance sustainable growth in Africa

Posted on by TIMOTHYRADIER

There is much talk lately about blended finance, the use of capital from public or philanthropic sources to increase private sector investment for sustainable development. I was on a panel earlier this year when one of the speakers described it as ‘the trampoline that can give you the bounce needed to launch.’

Smart deployment of blended finance not only provides early capital to sustainable solution but can guarantee long-term financing by attracting private and institutional investors.

FSD Africa Investment’s form of blended finance, development capital, is designed to invest in untested, breakthrough ideas that we believe can have a transformative impact on the continent’s sustainable growth. Our investment works to take early stage risk, allowing other sources of risk capital to invest in high-impact financial sector intermediaries and business, alongside us. Why is this important?

Africa needs investment capital with different risk/return profiles

Reaching the S require private and institutional capital to invest in structures that achieve development outcomes in a financially sustainable way.

We invest in high-potential businesses that are often deemed too risky for commercial investment.  The ‘trampoline effect’ makes it easier for commercial capital to flow to ventures that now match their risk/return profiles.  For example, our investment in <a”https://fsdafrica.org/programme/mfs-africa/”>MFS Africa, a remittance payments provider, enabled them to close their Series B round, and grow to raise capital in future funding rounds.

African SMEs need early stage risk capital

For investors seeking returns, Africa is a continent of opportunity, but also high risk.  Medium and SMEs account for 90%1 of Africa’s businesses and contribute to 40% of GDP, as well as creating 80% of the continent’s employment. The reality, however, is that the majority of African SMEs are in the early stages of their development, with investment needs between USD 50,000 and USD 500,000, but struggling to access capital to expand and grow into larger and more sustainable companies as they are deemed to high risk.

Our mandate is to change this perception, by testing new and alternative financing structures that can make investing in Africa’s SMEs more attractive to investors.

Africa needs investments in businesses that will increase access to basic services

The majority of people in Afrnot have access to affordable health services, opportunities to save for old age, safe water and clean energy or housing. With a projected population of 2.4 billion by 2050, the need has already surpassed the ability of governments and development finance institutions to address this crisis.

FSD Africa Investments development capital is critical to engaging the private sector, as well as institutional and impact investors, to fund businesses and products that can expand access to basic services for everyone. For example, we are already investing in an affordable housing finance company and a micro-pensions start-up.

Africa needs more private sector solutions for climate change

Millions of vulnerable people are falling into poverty as a direct consequence of climate change. Extreme climate conditions are affecting livelihoods – with loss of property, income, access to clean water and a safe environment. Trillions of dollars of investment are needed to combat climate change. We need to move quickly towards renewables, sustainable agriculture and energy efficiency.

We deploy development capital to mobilize financial resources into financial platforms and solutions to mitigate the causes of climate change and to adapt to its effects, reducing its impact.

Africa’s needs to harness its own sources of capital

Foreign Direct Investments to Africa have been on a downward trend over the last five years, falling from USD 74 billion in 2013 to 42 billion in 2017. Yet, Africa has large pools of its own capital through savings, insurance, pensions contributions but very little of thisoney finds its way back to the real sector or into alternative asset classes, such as private equity funds.  Finding investment platforms that use blended finance structures to manage the risk/return profiles would support a better allocation of this capital to the real economy.

Unlike many development finance institutions, we have a primary mandate to drive impact, which is secondary to the need to create return on our investments. We invest in order to drive impact and create solutions to the most pressing challenges facing Africa’s financial markets.

By stimulating and increasing the flow of commercial and institutional capital into financial firms and funds, we’re ensuring that Africa’s financial sector can serve its local communities and economies in the long-term, reducing the need for development funding in the future.

 

<cite”blockquote-source”>1The Challenges and Opportunities of SME financing in Africa, London Stock Exchange Group,

Empowering women through savings groups

Posted on by Kihingu Inc

“Our economies are built on the back of women’s unpaid labour at home”

– Melinda Gates

Empowering women means, at its core, providing women with strength and confidence to control their lives, and knowledge of their own rights so that they can actively engage in their communities.

Increasing women’s access to financial services allows them to have better control over financial resources and improves independence and mobility. It also fosters greater investments in income-generating activities, and the ability to make decisions that serve the needs of women and their families. In short – financial inclusion empowers women.

But how do women, especially those living in rural areas, access financial services?

Savings groups (SGs) and access to finance

SGs are easily accessible groups of people who get together regularly to save money and borrow from the group savings, if needed, according to rules established by the group.

Programmes that promote SGs typically focus on women’s economic empowerment and measure change through quantitative indicators of economic well-being. This is mainly because SGs enable the accumulation of funds which can be used as capital for micro-enterprises and for such programmes, the quantification of results is easier. This approach, however, provides a limited understanding of the role of SGs in affecting various dimensions of women’s empowerment, such as social, political and reproductive empowerment.

The SEEP network, in partnership with FSD Africa and Nathan Associates, commissioned a savings group research across sub Saharan Africa. The aim of the research was to highlight good practices in the design and monitoring of Savings Group programmes for women’s empowerment outcomes. The research also led to the development of a monitoring tool for the measurement of the various dimensions of women’s empowerment within SGs.

Savings groups and women’s empowerment

The research built upon pre-existing frameworks and for the first time captured women’s empowerment in the specific context of SGs.

In particular, seven ‘domains’ or clusters of core areas within which empowerment can be measured have been identified. These are i) Economic independence; ii) Confidence and self-worth; iii) Decision-making; iv) Voice and leadership; v) Time use; vi) Mobility; vii) Health.

Through these domains, SGs market actors can design SGs interventions with sight of the empowerment impacts they aim to achieve. They can also observe the likelihood of empowerment outcomes and impacts across different SGs intervention types:

i) Savings Groups only interventions, for example, a development institution working on financial inclusion could adopt an SGs only approach to enable target groups to access appropriate financial services from formal financial institutions. For these kinds of interventions, empowerment impacts are strongly observed in 2 out of the 7 domains, economic independence and confidence and self-worth. Through this type of intervention, it was observed that participants gained access to appropriate financial services, enhanced financial management skills, expanded social and support networks. Fewer impacts on mobility, time-use and health were observed.

ii) Savings Groups in combination with other economic development activities, for example, a Savings Group initiative could be combined with financial education, technical or vocational training, or specific income generating activities. Strong empowerment impacts are observed for such interventions for 3 out of the 7 domains, that is, economic independence, confidence and self-worth and decision-making. Improved decision-making is observed through participants engaging in employment or self-employment and demonstrating abilities in influencing relevant decisions in their homes and communities.

iii) Savings Groups within other integrated programming i.e. programming that is aimed at weeding out harmful social norms & inequalities: for example, a Savings Group initiative could be integrated with gender programming that challenges harmful social norms such as domestic violence, female genital mutilation, negative attitudes to family planning/reproductive health, etc. The programming approach could combine SGs with education and capacity building for members accompanied by gender dialogue sessions, engaging members and their spouses, community and religious leaders.

For such interventions, impacts are strongly observed within 5 of the 7 domains: economic independence, confidence and self-worth, decision-making, voice and leadership and health. Empowerment demonstrated by leadership is observed through changes in gender norms, especially within women’s economic participation; empowerment in health through increased and improved investments in maternal, neonatal and child health or improved attitudes and norms with respect to reproductive and sexual rights. For empowerment demonstrated by time use, impacts are observed through more equitable allocation of unpaid household labour.

An example of an impactful SGs within an integrated programming intervention (i.e. intervention option iii), is the ‘Towards Economic and Sexual Reproductive Health Outcomes for Adolescent’ girls (TESFA) project under CARE International in Ethiopia. Girls within SGs provided with sexual and reproductive health (SRH) training demonstrated both economic and health related gains from programme participation. These were observed through, increased SRH knowledge, improved communication on SRH, decreased levels of gender-based violence, improved mental health, increased social support and gender attitudes.

A systematic approach to analyzing women’s empowerment

Saving Groups create economic independence for women but in order to analyze their contribution to other domains of empowerment, there is need for a systematic design of a monitoring and results measurement approach. Through this research, a toolkit that provides guidelines as to how to create an evidence-based theory of change was developed. Drawing from existing frameworks economic empowerment and existing data, the toolkit proposes a more holistic framework for SGs, based on the seven domains of empowerment discussed above. It also provides some standardized indicators to improve the comparability and aggregation of results across projects and organizations.

For more information and application of the WEE toolkit click here.

 

CAHF 2019 housing finance in Africa yearbook (10th edition)

Our partner, the Centre for Affordable Housing Finance has launched the 10th Edition of its Housing in Finance Yearbook, which now contains 55 country and five regional profiles.

Targeting housing finance practitioners, investors, developers, researchers and government officials, the 2019 Yearbook provides an up-to-date review of practice and developments in housing finance and delivery in Africa, reflecting the dynamic change and growth evident in the market of each country over the past year.

The intention of this publication is to build a community of practice of housing finance experts in-country. Throughout its ten-year span, the Yearbook has retained a focus on the lower end of the market. What makes this publication unique is its overt emphasis on affordable housing. The profiles focus on the critical need for housing and housing finance solutions that are explicitly targeted at the income profiles of the majority of the population, for whom most commercially-developed residential property is out of reach.

Download the yearbook here.

Crowdfunding on the move: approaching P2P market regulation in East Africa

Posted on by TIMOTHYRADIER

In June 2016, the crowdfunding industry in East Africa met for the first time in Nairobi, Kenya. The indaba hosted over 60 leading platforms, regulators, donors, researchers and business service providers from Kenya, Rwanda, Tanzania and Uganda. The event highlighted crowdfunding as a potential source of alternative finance in the region (summary here).

To maintain momentum, FSD Africa has partnered with the Cambridge Centre for Alternative Finance and Anjarwalla and Khanna to examine the existing regulatory and policy landscape that governs debt, equity, rewards and donation-based crowdfunding activity in Kenya, Rwanda, Tanzania and Uganda.

According to Joe Huxley of FSD Africa: “Effective regulation and policy frameworks are critical. They provide the necessary rules and incentive structures to ensure the growth of crowdfunding markets in East Africa is carefully managed.”

The objectives of this work are to:

  1. Map out the existing regulatory and policy landscape for all crowdfunding models in Kenya, Rwanda, Tanzania and Uganda.
  2. Determine a list of priority areas for regulatory and policy development to support crowdfunding market development in East Africa.
  3. Identify key lessons from the regulation and policymaking of leading crowdfunding markets.

To provide relevant insights for East Africathe  regulation and policy frameworks for crowdfunding markets in South Africa, the UK, New Zealand, the USA, Malaysia and India will also be examined. In addition, the research team will also interview and seek insights from selected crowdfunding platforms, practitioners and experts internationally.

According to Kieran Garvey of the Cambridge Centre for Alternative Finance: “Throughout the project, we intended to work closely with regulators and industry practitioners in East Africa to foster common understanding of key crowdfunding risks and opportunities, and how to manage them appropriately.”

The research will be finalised and launched in September 2016.

—-

Further information:

To express your interest in this research or to participate, please email Kieran Garvey from the Cambridge Centre for Alternative Finance “mailto:kjg44@cam.ac.uk”>kjg44@cam.ac.uk

For further information on the crowdfunding industry, please the Cambridge Centre for Alternative Finance reports here: https://www.jbs.cam.ac.uk/faculty-research/centres/alternative-finance/publications/

Furthermore, the Africa and Middle East alternative finance benchmarking survey is currently underway. Please see further details here:

http://www.crowdfundinsider.com/2016/06/87301-cambridge-centre-alternative-finance-launches-first-industry-study-middle-east-africa/

Crowdfunding platforms in Africa & the Middle East can access the survey here: https://www.surveymonkey.co.uk/r/AltFin_MiddleEast_Africa

Central bank digital currency: friend or foe of mobile money in sub-Saharan Africa?

Posted on by TIMOTHYRADIER

Many claim that Central Bank Digital Currency (CBDC), formally known as Digital Fiat Currency, can have many benefits for financial inclusion and has the potential to impact mobile money. But can CBDC overcome the challenges that current mobile money providers and consumers face?

First things first; what is “Central Bank Digital Currency”. Simply put, CBDC is a digital representation of physical cash. As its digital alternative, CBDC is interchangeable with physical cash on a one-to-one basis as valid legal tender, and adopts all three of cash’s key features: a unit of account; a store of value; and a universally accepted means of exchange between transacting parties. The distinction between CBDC and private cryptocurrencies are summarised below.

Figure 1. Digital Fiat Currency compared to Private Cryptocurrencies

Source: Cenfri, 2018

So, what’s the relevance of CBDC to financial inclusion?

CBDC has the potential to digitise the entire payments value chain, from the first to the last mile in a more cost-effective and efficient way. Cenfri’s 2018 report “The benefits and potential risks of digital fiat currencies” finds that CBDC, unlike cryptocurrencies, can promote adoption through network effects because of the key features that is shares with cash. CBDC’s speed, efficiency and safety (being backed by the Central Bank) introduces much needed trust in digital payment mechanism, something that is lacking in private cryptocurrencies and mobile money. And trust is critical where money is involved. Trust means that CBDC could eventually be adopted along the entire value chain (like cash) and hence could promote financial inclusion at all levels of society.

But what about mobile money specifically?

Mobile money may be a leader in “banking the unbanked” but the phenomenon still faces obstacles that undermine its uptake and use, as shown in the figure below.

Figure 2. Key supply and demand cost drivers of mobile money in SSA

Source: Cenfri 2019, based on data from various literature sources

The application of retail CBDC to mobile money can foster greaterinteroperability, improve payment efficiency, facilitate cost-saving gains and reduce key payment risks typically associated with mobile money. CBDC can also enable trust in mobile financial services due to its safety and the way in which its speed eases liquidity constraints of mobile-money agents. CBDC also eliminates the need for unnecessary third-party intermediaries and so streamlines payment clearance at the same time as enabling true interoperability.

How about the downsides of CBDC?

If CBDC is not implemented appropriately it could exacerbate contextual inequalities along the lines of digital, financial and economic disparities between population segments and also intensify the complexity of mobile money. For example, if not everyone has a mobile phone then only those that do can access CBDC; and if only certain areas have network coverage then only those in those areas can access CBDC; and so on. CBDC could threaten the intermediation role of traditional deposit-taking. CBDC could also exacerbate poor uptake of mobile money (e.g. due to illiteracy) simply because of CBDC’s (perceived) complexity. If everywhere you can only pay in CBDC then it may make the gap between illiterate and literate users even wider. The more vulnerable segments of the population, as primary unstructured supplementary service data (USSD) customers, could also be at greatest risk of identity fraud.

So what can be done to avoid these risks?

CBDC can bring maximum benefits to mobile money and financial inclusion if it meets certain pre-conditions. The basic principles to avoid these risks lie with governments and the enabling financial environment they create in their respective countries. Governments need to ensure appropriate and effective legislation and anti-money laundering and combatting the financing of terrorism regulation, as well as the implementation of robust consumer protection laws and national cyber-security defences. We know that that some developing economies lack these key laws – or lack the ability to uphold the legislation, even if it does exist. Through our Risk, Remittances and Integrity Programme, FSD Africa is partnering with Cenfri to combat these challenges by helping countries implement appropriate regulation that enables low-cost, efficient, domestic and cross-border payments to enable inclusive financial systems to operate at scale, and positively impact broader economic development.

It’s clear mobile money presents a significant use case for CBDC in the drive towards financial inclusion, but not without risks. If governments, supported by development partners, address these concerns, the impact of CBDC on mobile money could not only be positive, but could also contribute to significantly greater financial inclusion and better economic integration altogether.

You can delve deeper into the role of CBDC in delivering financial services to the unbanked and CBDC’s applicability to mobile money by downloading Cenfri’s latest report “Central Bank Digital Currency and its use cases for financial inclusion; a case for mobile money”. 

How green bonds can fund development

Posted on by TIMOTHYRADIER

Opinion article originally published on Devex.

One of climate change’s great injustices is that the worst affected countries are the ones that have contributed least to the problem.

In 2015, the world coalesced behind the Paris Agreement on climate change in an effort to transition to a low carbon future. And while much attention has been on the United States’ decision to withdraw from the agreement, many African governments have been stepping up.

Following the African Union’s lead, Ghana, Ethiopia, and Kenya, among others, have all factored climate change into their national development plans. And it is easy to see why these African nations are approaching climate change with earnest given the danger climate change presents to the continent. Cyclone Idai, for example, left incalculable destruction across three countries last month, an unfortunate reminder of the devastation climate change could have on the continent.

Trillions of dollars of investment are needed to combat climate change. And while the Paris Agreement does have funding mechanisms to support developing countries, these funds can only go so far.

Moreover, unlike the world’s primary greenhouse gas emitters, developing countries in sub-Saharan Africa need to encourage growth without fueling emissions.

Take electricity: Sustainable Development Goal 7 states that everyone should have access to affordable and reliable electricity by 2030. Yet, in a region where more than half the population still does not have access, governments need to improve access and reliability without turning to high-emitting power sources such as coal.

The role of green bonds

A solution to the crisis may lie in green bonds, which allow issuers to raise money specifically for environmentally friendly projects, such as renewable energy or clean transport.

This year, analysts predict the green bonds market will grow to $200 billion, a 20% increase from last year and a significant jump from 2016, which saw $87 billion raised. But while the global market continues to grow, there are fewer bonds available across Africa.

Most of Africa’s green bonds have been issued by the African Development Bank, which has raised over $1.5 billion since 2013. While Nigeria issued a $29.7 million bond to fund solar energy and forestry projects in December 2017, no other countries have followed suit.

African governments have historically relied on development finance institutions to fund green projects such as irrigation initiatives and solar energy. However, this is unsustainable and ignores potential capital that could be raised from pension funds, the diaspora, and the middle class. For example, Kenya’s pension sector is valued at about 1.2 trillion Kenyan shilling, or $11.9 billion.

If national governments want to unlock more capital, structures are needed to give investors the confidence to invest.

Kenya, Nigeria, and South Africa are leading the charge in sub-Saharan Africa. Since 2017, these countries have been working with a range of partners, including FSD Africa, to develop a robust framework for the issuance and listing of green bonds. Now, Nigeria and Kenya have joined India, China, and Indonesia in turning their frameworks into official guidelines — and the market is responding.

Last month, the Nigerian-based Access Bank issued Africa’s first certified corporate green bond, unlocking $41 million to protect Eko Atlantic City, near Lagos, from rising sea levels. This bond will also support a solar energy project. Notably, the bond was fully subscribed, highlighting the fact that if the frameworks are built, investors will come.

While development finance will always play a critical role in supporting development on the continent, countries are recognizing they need to unlock funding from other areas. Kenya and Nigeria have heard this call and global markets have responded. This should give other countries confidence to follow suit.

Given the nascent nature of capital markets in Africa, we have the unique opportunity to build them from the ground up and respond to pressing priorities including climate finance. This is particularly critical as governments start to pursue infrastructure development at a larger scale.

Green bonds may still be a small piece of the global bond market, but they are showing real potential for helping developing countries move to greener, more equal economies.

Financing the frontier: risk, reward, and reality in Africa’s fragile stat

Posted on by Kihingu Inc

Like most bankers, Patrick Kiiru did not imagine Congolese refugees as his ideal clients, seen by most as simply hungry, homeless, and transient. But after three days with FSD Africa in Gihembe Refugee Settlement—a bumpy one-hour journey north of Rwanda’s capital Kigali—the head of diaspora banking at Kenya’s Equity Bank Group began to change his mind.

After having experienced the refugee-finance business case firsthand, Kiiru describes reaching an “aha” moment: “I can solve this problem. It is possible to serve… refugees profitably.” Refugees need more than food and shelter; they, too, can benefit from financial services.

With targeted financial and technical support from two United Kingdom aid-supported agencies—FSD Africa and Access to Finance Rwanda—Kiiru’s bank is preparing to offer its Eazzy Banking mobile money product to Rwanda’s adult refugee population of more than 89,000, with plans to expand in other countries. With a footprint in Kenya, Uganda, Rwanda, and the DemocratDRC), this may be the early days of a region-wide approach by Kiiru and his team.

This risk perception versus reality gap is not distinct to banking refugees. The theme persists across all 26 fragile and conflict-affected states in sub-Saharan Africa, as defined by U.K. aid. There are two big picture consequences.

First, development agencies and their partners with a focus on private sector development can neglect to deliver services where they are needed most. According to a 2016 CGAP survey of 19 financial inclusion donors in sub-Saharan Africa, the highly fragile states of Chad, Central African Republic, and Somalia had only one active donor each. This means some countries, regions, and communities remain trapped within a humanitarian crisis paradigm.

As the world grows more prosperous, international development practices will only increase in concentration in the left-behind nations, regions, and communities.

Second, development financiers, commercial investors, and business leaders can misprice risk—adding a premium based on perception rather than the reality. This means capital is not being efficiently allocated. According to World Bank figures in 2017, excluding Ethiopia, Kenya, and Nigeria, just 3.23 percent of all foreign direct investment in sub-Saharan Africa reached fragile states.

This mean that, in fragile states, many investment-ready firms are left without the long-term finance they need to survive and grow. This is not to say fragile states are not difficult places to invest and do business. Since 2016, FSD Africa’s own increasing fragile states footprint in the DRC, Sierra Leone, Zimbabwe, and for forcibly displaced people has had to weather a cycle of instability: political (e.g., military coups, new central bank governors), environmental (e.g., Ebola outbreaks, mudslides), and economic (e.g., currency depreciation, inflation).

But the people, entrepreneurs, and investors in Africa’s fragile states are resilient and resourceful. The FSD Africa team has witnessed numerous examples of smart practices which help to mitigate risk.

On the investor side, locally born nationals, who are better able to price risk accurately, are particularly active; many accept that there will be arid periods when deployapital is too risky, and so switch to running their own enterprises; and many deals rely on financial innovation to hedge against risks.

On the donor side, some build a presence—people and platforms—which lays dormant when things are difficult, but which springs into action when pockets of opportunity present themselves. Others complement their fly-in, fly-out model with a permanent local lead, who provides a depth of relationships and market intelligence to build and maintain momentum in good times and b

A place to call my own: the significance of housing for women

Posted on by TIMOTHYRADIER

Nearly one in four households in Africa are headed by women, reaching 41% in Zimbabwe, 36% in Kenya and 35% in Liberia according to the World Bank. Female-headed households have been increasing across all countries, globally. So, as well as considering the broader challenges and opportunities affordable housing creates for everyone, we should also ask: what’s the significance of housing specifically for women?

The consequences of good housing are far-reaching: the quality of housing impacts on its residents’ health and safety, their ability to function as productive members of society, and their sense of well-being in their community. Good housing contributes to good health outcomes, provides protection from the elements and supports a family’s needs throughout its life cycle.  These factors have a particular impact on women. In many low-income households across Africa, whether in rural areas or in the cities, the home is still the woman’s domain.  The quality of the living environment impacts partn her day-to-day experiences and capacities to meet the needs of all who depend upon her. It is for this reason that we know that women are especially keen on home improvements and often the drivers of such initiatives within their households.

Increasingly, and especially in high-unemployment contexts, the income-earning potential of housing is also being recognised. Many women identify entrepreneurial opportunities through their housing, using their homes as their business premises, running a shop on site, or working remotely. Some are renting out one or two rooms, or a structure in the backyard (see our video interviews with two female clients of Sofala’s i-build home loans project) contributing to household income. Recent research finds that poverty falls faster, and living standards rise faster, in female-headed households.

A home and its surroundings also affect a woman’s identity and self-respect. This social dimension, while less tangible, is nevertheless hugely significant. A home offers long- and short-term security for women as household members, especially those that are unmarried. Secure housing provides safe shelter and protection from homelessness after divorce, widowhood, job loss or other challenging circumstances. A key development worth noting has been that all government subsidised homes in South Africa are now registered in the names of both spouses. In short, a secure home enables more choices and more individual freedom. Having “a place to call my own” makes it possible for a woman to run her own household, that is, to become the head of the household, providing a degree of security to ride out and rebound from life’s uncertainties, such as temporary unemployment or illness.

Another impspect of home ownership is access to collateral, which enables women to access financial services and accelerate their earning potential. A savings account in a woman’s name offers a form of security and independence: a safe place to store and protect earnings. Women make better borrowers because they know that their ability to improve the home in the future depends on the reputation they develop in managing a particular loan. Women are therefore a very important part of the housing solution, and should be understood as such, by policy makers, project implementers, and service providers. In cases where women do not have title deeds for their home, banks are revolutionising the way they lend for home construction. For example, in Kenya – a country with a population of 50 million, but less than 30,000 mortgages – the Kenya Women Microfinance Bank (KWFT) has created a new loan product called “Nyumba Smart” (“smart home”). Using flexible collateral, the loans provide female customers with up to $10,000, repayable over three years, for the construction of all or part of a house.

Despite this progress, over 300 million women live in African countries where cultural norms prevent equal property rights, even when there are formal, equitable property laws ouragingly, innovative technology-based tools are helping to overcome this barrier. For example, the social enterprise, Map Kibera is working on an open-source mapping platform for Nairobi’s largest slum. The objective is to give inhabitants an informal claim to their land, to lobby for services and to act as “evidence” in negotiations with municipal governments, which may otherwise bulldoze settlements with no legal title without warning.

At FSD Africa, we believe housing plays a crucial role in economic development and poverty reduction, not least for women. That is why we have partnered with the “http://housingfinanceafrica.org/”>Centre for Affordable Housing Finance in Africa (CAHF) to promote investment in affordable housing and housing finance across Africa; we have also invested in Sofala Capital, which includes Zambian Home Loans Limited and iBuild Home Loans Pty Limited as part of its group of companies.  By strengthening Sofala’s balance sheet, we are enabling these companies to achieve scale with their innovative housing finance product offerin

What’s next for green bonds in Africa

Posted on by TIMOTHYRADIER

The Green Bonds Listing Rules and Guidelines for Kenya were issued last week. These make it clear to issuers of Green Bonds in Kenya what the regulators expect of them by way of disclosure. Regulatory certainty is the bedrock of well-functioning financial markets and so the launch is an important milestone in the development of this fast-growing market.

The Kenya Green Bond Programme, co-funded by FSD Africa, has already identified KSh90bn of investment opportunity in Green Bonds in the manufacturing, transport and agriculture sectors in Kenya, a small but significant contribution to a global market that is already worth almost $400bn.  The Kenyan government itself is planning to issue its first Green Sovereign Bond, perhaps in the next six months.

The Patron of the Kenya Green Bond Programme, Central Bank Governor Patrick Njoroge, a passionate environmentalist, spoke eloquently at the launch about the societal value of investing through Green Bonds.

The elephant in the room was the interest rate cap in nya. While caps remain in place, the pricing for Green Bonds, as for other non-sovereign bonds, will almost certainly be prohibitively expensive compared to long-term bank finance.  We run the risk that the momentum that now exists in Kenya for Green Bonds will stall because of this almost existential problem. The Governor urged us to take a long view – implying the caps will one day be lifted.  We live in hope but it is a pity that priority sectors for Kenya’s economic development, such as affordable housing and manufacturing, cannot at the moment easily benefit from investor interest in this asset class.

Already Nigeria, which issued a Green Sovereign in December 2017, is pulling ahead of Kenya and the Nigerian corporate sector seems to be gripping the Green Bond opportunity more vigorously than Kenya with several issues at an advanced stage, including in the commercial banking sector.  FSD Africa has an active Green Bond programme in Nigeria too.

Another problem is easy access to competitively-t from Development Finance Institutions. On the one hand, DFIs push environmental priorities through ESG frameworks. On the other, they offer credit lines to potential issuers on significantly more attractive terms than bond pricing.  Does that matter – if green projects get funded anyway?  Well, yes it does, if it means we keep not seeing demonstration transactions for Green Bonds. The potential supply of finance for Green Bonds from local pension funds and other institutions is so much greater than what DFIs will ever be able to make available – we should take what opportunities there are to get local institutional capital into this market and DFIs should step back.

A big part of the attraction with Green Bonds is the extra corporate disclosure that is required. Companies are required to lay out their environmental strategy for the Green Bond they want to issue and what systems they will put in place to make sure the bonds proceeds are allocated for the stated environmental purpose.  This createunity for a different kind of conversation between investors and issuers, forging a connection that is values-based as well as purely economic.

In the same way, according to Suzanne Buchta of Bank of America, a big issuer of Green Bonds, Green Bonds create opportunities for new kinds of “corporate conversation” within companies – how green is this initiative, how green are we as a company?  Buchta suggests that the ESG disclosures from Green Bonds lead to such positive outcomes that they could become the norm for all bonds.

Interestingly, the Economist this week is also calling for companies to be obliged to assess and disclose their climate vulnerabilities by making mandatory the https://www.fsb.org/2017/06/recommendations-of-the-task-force-on-climate-related-financial-disclosures-2/ voluntary guidelines issued in 2017  by the private sector Task Force on Climate-related Financial Disclosures set up by the Financial Stability Board.

This trend towards transparency is good for market-building.  It’s good for investors, companies and for employees of those companies.  And Green Bonds are playing an important catalytic role in this.