Country: Kenya

Local currency solution for Multilateral Development Bank Portfolio Transfer: Feasibility Study

In June 2023, FSD Africa was awarded funding from the MDB Challenge Fund to develop a project focused on a ‘Local Currency Solution for Multilateral Development Bank (MDB) Portfolio Transfer’ (the project). FSD Africa’s proposed solution aims to empower MDBs and Development Finance Institutions (DFIs) to provide more financing to developing and emerging economies. This is aligned with the recommendations of the G20 Independent Review of MDBs’ Capital Adequacy Framework (CAF) report. The focus area is on promoting financial innovation and development of new instruments to catalyse private investment.

The purpose of this study is to explore the potential for transferring asset portfolios funded by multilateral development banks (MDBs) to domestic institutional investors in Africa through a local currency solution.

The primary aim is to expand the scope of MDBs’ investments by freeing up capital while benefiting local institutional investors and capital market development and reducing the foreign exchange risk of those benefiting from the investments funded by MDBs.

The study focuses on markets in East and West Africa with relatively deep institutional investor bases, including Kenya, Tanzania, Uganda, Ghana, Nigeria, Cote d’Ivoire, and Senegal.

Technical Assistance Grant Signing Ceremony with Dhamana Guarantee Company

UK-KENYA PARTNERSHIP REACHES FURTHER MILESTONE FOR LONG-TERM CLIMATE FINACE SOLUTIONS IN KENYA

  • Investors back Dhamana Guarantee Company’s work to transform East Africa’s financial landscape.
  • Tackling climate change given another boost in Kenya as, for second time in a week, a UK-Government backed investor in green finance solutions puts pen to paper.

Monday 30 September 2024 – the Dhamana Guarantee Company Ltd (Dhamana) has reached a major milestone, marked at an event in Nairobi today.

Investors in the new company put pen to paper at a signing ceremony, which will allow the company to kick-start operations.

Dhamana aims to mobilise private sector finance to support the development of sustainable growth businesses. It will do so by issuing guarantees to commercially viable projects, businesses, and institutions that tackle the climate crisis and make progress towards the Sustainable Development Goals (SDGs).

The design and creation of the company was supported by the UK-Government backed investor the Private Infrastructure Development Group (PIDG) through InfraCo Africa.  With its anchor investment, PIDG kick-started Dhamana, attracting further investment from the African Development Bank (AfDB) and County Pension Fund Financial Services (CPF), with support provided by Cardano Development and FSD Africa.

The project will target businesses that add value to people’s lives, improving the day-to-day life of Kenyans. The increase in affordable finance for Kenyan businesses will mean projects will require less capital to get off the ground, make money, and generate growth. Dhamana will also enable investors to diversify their portfolios, acting as a catalyst to transform East Africa’s financing landscape.

This is the second time in a week that an investor in climate solutions backed by the UK Government has achieved a milestone. Last week, MOBILIST signed a partnership with the Nairobi Securities Exchange, which aims to drive the listing of new investment products in the Kenyan market and increase the amount of private sector capital available for development and climate projects in Kenya and drive growth.

Dhamana CEO, Christopher Olobo, said, “With the support of our investors and supporters, the Private Infrastructure Development Group (PIDG), Cardano Development, FSD Africa, CPF Financial Services, and the African Development Bank (AfDB), we have worked to develop Dhamana as an important catalyst for long-term sustainable finance in the region. Dhamana’s local currency guarantees will connect pools of untapped capital with East Africa’s real economy, making a tangible difference to people’s lives and offering local investors the opportunity to invest in Paris-aligned initiatives.” 

Speaking after the event, PIDG CEO, Philippe Valahu said, “Building on the success of other PIDG-supported credit enhancement facilities in Nigeria and Pakistan, Dhamana will demonstrate the value of such a facility in the East African market, opening up opportunities for investors and clients alike. Crucially, Dhamana will engage new partners and investors in our efforts to urgently address the climate crisis and accelerate delivery of the UN sustainable development goals.”

FSD Africa invests in Holocene, a Climate Tech Start-up Venture Capital Provider

FSD Africa’s Early-Stage Finance Pillar is investing US$150,000 in Holocene Ventures Fund (HVF), a climate tech start-up venture capital provider that seeks to raise an initial US$2 million to invest in 12 high impact climate businesses. HVF I will provide the track record and pipeline to raise a $30M pre-seed to series A climate tech fund in 2025.  The investment by FSD Africa comes alongside investments from other angel investors across Europe, USA and Africa.

Mary Kashangaki, Assistant Manager, Digital Innovations, FSD Africa said:

We need to think differently about how we finance Africa’s green transition. FSD Africa’s investment in Holocene offers an exciting opportunity to work with experts to build a new kind of venture capital fund that is flexible enough to meet the unique financing needs of early-stage climate ventures.

Holocene, based out of South Africa, has created an investment platform for climate conscious individual and institutional investors seeking climate positivity and venture capital returns. Holocene Venture Fund (HVF) will provide innovative pre-seed financing, combining both cash and venture building services, to climate tech start-ups, recognizing the need for diverse financial solutions to scale climate businesses. 

Josh Romisher, CEO, Holocene commented:

Africa is incredibly important in the global climate conversation. Holocene is very eager to partner with innovative investors such as FSD to prove African climate tech can deliver measurable climate impact and VC returns.

To date, Holocene has made 6 investments from its permanent capital vehicle as well as another 4 investments from HVF I. It aims to make 5 investments per year infusing them with a catalytic blend of financial & human capital with a focus on commercial outcomes. With concerted effort by diverse players to accelerate green growth in Africa, specialist climate focused investment funds like Holocene are expected to enhance capital flows and innovation in new climate technology led solutions across Africa.

 

Geothermal Exploration Risk Underwriting Facility

The Insurance Regulatory Authority of Kenya, Ministry of Energy and Petroleum, State Department of Industrialisation and East African Insurance Sector (ICEA Lion, Kenya Re, Old Mutual, GA and Mayfair) have today announced a geothermal risk underwriting facility, the first of its kind in Africa.

The facility will underwrite up to US$ 2 million in early project development with amounts exceeding the amount being externalized i.e. covered by external re-insurance. The product is anticipated to accelerate and attract greater investments in green energy projects in Kenya and the region by mitigating the financial risk associated with geothermal projects. The development of the facility was supported by FSD Africa in collaboration with partners Parhelion Underwriting, and Kenbright.

Speaking regarding the announcement, IRA Commissioner of Insurance Godfrey Kiptum lauded the facility as one that will deepen Kenya’s green energy credentials by spurring investments in the geothermal subsector, a form of energy in which the region holds great potential. “The insurance sector plays a critical role in the social-economic development of any nation. I am proud that insurance sector has kept innovation alive with products such as the geothermal risk underwriting facility, that enable greater private sector investment in the geothermal energy. It is also gratifying to note that this product will enhance green energy and sustainability of our economy” said Kiptum.

On his part Principal Secretary, State Department of Energy Alex Wachira noted that insurance cover for the risky upstream geothermal exploration work is a great enabler for the country to exploit her vast geothermal potential estimated at 10,000MW “The huge potential of geothermal energy makes it not only an energy source but also a driver of economic growth and sustainable development. Our country is endowed with vast geothermal resources, and great progress has been made in tapping into this clean power. However, for us to fill the energy gaps, we need collaboration and investment between the public and private sectors” explained the PS.

The de-risking facility announced will cover early-stage development drilling risks for investors in geothermal projects. This facility represents a critical step in creating a more favourable investment environment by mitigating the financial risks associated with these high-potential but high-risk projects. FSD Africa Risk& Resilience Director Kelvin Massingham has hailed the insurance sector for innovation and leading the way in supporting green energy transition in Africa. “At FSD Africa we are committed to make finance work for Africa and have finance flow into green investments for a sustainable future. We are proud to have worked with the State Departments of Energy and Industrialization as well as the insurance regulator and the private sector in developing this facility that will de-risk upstream geotherm resource prospecting, enabling greater investments in green energy” noted Massignham.

This underwriting facility not only marks a significant milestone in Africa’s journey towards sustainable energy but also sets a precedent for future initiatives aimed at de-risking and supporting other high-impact sectors across the continent. The prospect for the continent to leapfrog the energy transition is possible especially with solid backing from key stakeholders and a clear path forward. The promise of a greener,more sustainable Africa is within reach.

To drill a geothermal well requires on average US$ 5 million, with significant risk of missing geothermal resource after drilling. Most commercial debt is shy to cover this phase, yet its critical and quite upfront in development of geothermal energy. Kenya is already a leader in geothermal electricity, with a total installed capacity of 988.7 MW contributing 47% of the power on the grid. This places the country at rank sixth globally and first in Africa in terms of geothermal power development. However, the country still holds massive geothermal potential, estimated at 10,000 MW.

FSD Africa’s support of the geothermal underwriting facility is part of a wider geothermal energy programme that includes, among other things, technical capacity development and facilitation, advocacy and technical assistance, fundraising, and inclusive economic growth.

FSDAi Nyala Facility invests US$ 1 million in First Circle Capital Africa Fund

FSDAi Nyala Facility invests US$ 1 million in First Circle Capital Africa Fund I FSDAi Nyala Facility BV, a facility set up by FSD Africa Investments to invest in emerging local capital providers is injecting US$1 million into Africa-based specialist VC fund First Circle Capital. Run by former entrepreneurs and fintech executives Selma Ribica and Agnes Aistleitner Kisuule, First Circle invests in the continent’s most promising early-stage financial technology companies, leveraging the partners’ industry network and expertise with an angel investment track record at 33x MOIC.

First Circle focuses on insurtechs, financial infrastructure and climate fintechs. Other areas the fund
invests in is fintech Software as a Service (SAAS), Reg Tech and Alternative Lending Model firms. The team has built a portfolio of 13 investments so far in these areas, across 7 African markets.

Announcing FSDAi Nyala Facility’s investment, FSDAi’s Chief Investment Officer, Anne-Marie Chidzero said: “We are thrilled to back this promising GP team of remarkable female investors. First Circle stands out in the market as a thesis-led specialized fund with great depth of expertise and strategy in the fintech sector. We believe that FSDAi Nyala Facility’s backing will catalyse more institutional LPs into First Circle Capital Africa Fund I”.

According to BCG and the recent QED report, Africa is the fastest growing fintech region in the world, expected to grow its revenues by a staggering 13x by 2030. In Africa, fintech is well posed to resolve financial services access issues for the continent’s excluded and underserved population and SMEs, and to address its young population’s needs. Most Africans’ first interaction with the financial services sector may be through their smartphones, and BCG projects a fintech revenue CAGR of 32% until 2030, with South Africa, Nigeria, Egypt, and Kenya being the key markets.

Selma Ribica and Agnes Kisuule, Co-Founding partners of First Circle Capital commented:

“Expanding access, availability and stability of financial services for African consumers as well as SMEs is critical for economic development and social resilience. The majority of fintech funding to date has gone into payments, hence investing in the next layer of financial services poses a significant opportunity. We are investing in Africa’s most innovative entrepreneurs building the next layer of financial products, that enable and expand access to financial services for individuals and SMEs across Africa. We are excited to have FSDAi Nyala Facility as our first institutional partner, especially given FSD Africa’s track record in deepening access to financial services on the continent.”

Co-founders and managing partners are former M-Pesa executive and FinTech investor Selma Ribica based in Morocco and former emerging markets entrepreneur Agnes Aistleitner Kisuule based in Kampala. Selma’s angel portfolio is at 33x MOIC in early stage fintech and includes companies such as Qonto, Tabeo, Expensya and Agnes has previously built businesses in Jordan, Ukraine and Uganda.

The fund has offices in Kampala and Casablanca. With their team, the managers are leveraging their operational know-how as successful operators, previous track record, and strong network across Africa and internationally to support portfolio companies with fundraising and growth.

First Circle Africa Fund I is backed by FSDAi Nyala Facility, Axian Group, and several serial entrepreneurs and investors.

 

New research suggests Africa’s Green Economy could create more than 3 million direct jobs by 2030

Nairobi, 24th July 2024 – Shortlist and FSD Africa, with analysis from the Boston Consulting Group, today published “Forecasting Green Jobs in Africa,” a first of its kind report that forecasts the new direct job creation potential of 12 “green” sub-sectors by 2030. The report predicts the creation of up to 3.3 million new direct green jobs across the continent by 2030, with the majority in the renewable energy sector, particularly solar. The study, the first in-depth analysis of workforce needs within major green value chains over the next five years, provides detailed forecasts for five focus countries, Democratic Republic of Congo (DRC), Ethiopia, Kenya, Nigeria and South Africa, which together account for more than a fifth (22%) of new jobs, and in key sectors such as renewable energy, e-mobility, agriculture, construction and manufacturing.

“Forecasting Green Jobs in Africa” underscores the critical importance of a skilled workforce as an input accelerating African green industries, emphasizing the need for substantial investment in skills development and workforce mobilization. Moreover, the millions of jobs created in the green revolution will also contribute to the formalization of African economies, and the inclusion of whole populations in stable systems of remuneration, social security and taxation for the first time.

Based on the findings, the report also outlines key strategies required to cultivate Africa’s green jobs ecosystem: from targeted investments in high-potential sectors and value chains, the fostering of cross-sector collaboration among governments, private sector, educational institutions and investors, to the development of comprehensive support policies for green sectors. The report also calls for further analysis and granularity to labour demand key value chains to identify Africa’s current skilled labour supply and any potential gaps.

While some experts have suggested that up to 100 million green jobs may be created by 2050, this report takes a more near-term, sober, and realistic look at the job creation potential of just 12 specific sub-sectors or value chains and only until 2030. This more conservative analysis is intended to guide near-term investments and policy decisions among universities, workforce development actors, and government as we ensure the mobilization of the right skills and workforce to meet demand.

Significantly it predicts that 60% of the employment generated by the green economy over the coming six years will be skilled or white collar in nature. Within this, 10% constitute “advanced jobs” (highly skilled, requiring university degrees to fulfil), whilst a further 30% are projected to be “specialized” (requiring certification or vocational training) and 20% will be administrative in emphasis. Crucially, these job types tend to attract higher salaries and will, therefore, play a central role in spurring the growth of the middle class in countries hosting these high-growth sectors. Important also is the stability of the unskilled jobs created – which will offer ladders up the employment scale for candidates, whose employability will be enhanced by access to training and experience.

“There is a cross-sector effort across Africa to spur employment and sustainable development,” said Mark Napier, CEO of FSD Africa, “but stakeholders lack a shared, granular understanding of where the green jobs are going to come from. This report offers a methodology for forecasting green jobs which allows us to get practical about where we need to invest to make these jobs happen.”

“This is the first public report that takes seriously the notion that human capital and talent is important as both an input to green economic growth, and as a positive outcome – in the form of millions of new, direct jobs.” says Paul Breloff, CEO of Shortlist. “Now policymakers, and funders, and workforce developers need to step up to meet this near-term demand with effective training, apprenticeships, and job/skill matching, in hopes of achieving Africa’s green promise.”

Other key findings include:

  • South Africa, Kenya and Nigeria represent the highest job creation potential (16%) due to population, gross domestic product (GDP) and industry maturity
  • The renewable energy sector alone is expected to generate up to 2m jobs (70% of the total) of which 1.7m will be in solar
  • Solar is the most important contributor to green jobs in South Africa (140,000 jobs) and Kenya (111,000 jobs)
  • Hydroelectric is forecast to be the leading employer in both DRC (16,000 jobs) and Ethiopia (33,000)
  • Agriculture and nature are forecast to produce up to 700,000 jobs (25% of total), of which more than half (377,000) will come from climate smart agriculture technology

Jobs created by country

South Africa

  • South Africa: between 85,000 to 275,000 new green jobs are forecast by 2030 – mainly in energy and power production, and agriculture and nature
  • The solar sector leads job creation in South Africa with 140,000 jobs projected

Nigeria

  • Nigeria predicted to put on between 60,000 and 240,000 new green jobs by 2030
  • Aquaculture and poultry lead job creation, with 69,000 jobs projected

Kenya

  • Kenya predicted to put on between 40,000 to 240,000 green jobs by 2030
  • The solar sector leads this job creation, with estimates that it will generate 111,000 jobs in the country by the decade’s end

Ethiopia

  • Ethiopia will see between 30,000 and 130,000 new green jobs by 2030, mainly in energy and power production
  • Hydropower generation leads as a job-creating sector, with 33,000 jobs projected

Democratic Republic of Congo (DRC)

  • The DRC is predicted to put on between 15,000 to 45,000 new green jobs by 2030; mainly in energy and power production and distribution
  • Again, hydropower is expected to lead job creation as a sector with 16,000 jobs expected

Click here to download a copy of the report

How capital markets can enable gendered socio-economic progress

Imagine a world where millions of ingenious women in Africa have the resources to turn their ideas into thriving businesses. That is the future FSD Africa is working towards, and capital markets are the key. This isn’t boring financial jargon. We are talking about unlocking the potential of entire communities.

Before the Covid-19 pandemic, women-owned businesses in sub-Saharan Africa faced a staggering funding gap of $42 billion while the total financing needs for 128 developing countries was a staggering $5.2 trillion[1]. Though these numbers might have shifted slightly in the past four years, the challenges posed by post-pandemic economic recovery likely have not made things easier. Women are disproportionately affected by issues like lack of clean water and access to clean cooking solutions. Hours spent fetching water or gathering fuel are hours lost for education, work and family. Women make up nearly 70% of the workforce in agriculture yet receive only 7% of investments.

But here’s the good news: things are changing. On the 19th of February 2024, FSD Africa launched a game-changer – the Africa Gender Bonds toolkit – which is not just a resource, but a cheat sheet for unlocking the power of capital markets to support women in Africa. This is just one way that FSD Africa is playing its part in strengthening sustainable financial markets as a key tool to reduce barriers facing women in Africa, particularly women in business.

We have seen many efforts in trying to solve for gender inclusion, particularly inclusion of women in the finance sector. While much is being done as to how to tailor financial products to attract women more as a customer segment; there is less effort when it comes to thinking about investor incentives. How do we unlock more financing from investors to flow to women businesses? Which incentives need to be in place to mobilise and catalyse more gender responsive financing from capital markets in Africa? This is a key piece of the puzzle that we are committed to helping solve. We believe that leveraging capital markets in capital mobilisation for gender offers us a blank slate where creativity and innovation can flourish in integrating gender metrics and considerations into the design of capital mobilisation vehicles.

Real stories, real impact

In the past half a decade, like-minded institutions, have significantly increased their efforts to anchor investments in gender-intentional capital mobilisation vehicles such as gender bond issuances that tap into investor incentives. These partnerships have sparked remarkable catalytic and demonstrative change. Take, for instance, our support to NMB Bank Plc in issuing the Jasiri Bond, Sub-Saharan Africa’s first publicly listed gender bond. According to the first Jasiri Bond impact report, the response was overwhelming—it was oversubscribed by a staggering 197%, drawing in 1,630 investors, 99% of whom were individuals. Here’s the best part: 97% of the loans went to women! That’s thousands of women empowered to chase their dreams and build a brighter future for themselves and their families. Such partnerships exemplify the power of collaboration in driving tangible impact and advancing gender equality in finance.

And it’s not just about businesses. Bonds issued in sectors with high female participation can also strengthen capital mobilisation for gender benefits. For example, UNICEF estimates that women and girls globally spend 200 million hours per day fetching water for household consumption. In Sub-Saharan Africa, a single trip to collect water takes an average of 33 minutes in rural areas and 25 minutes in urban areas. This takes time away from productive economic activities, education, and leisure, and increases exposure to gender-based violence. In the energy sector, the Clean Cooking Alliance estimates that women and girls spend up to 5 hours per day gathering fuel or spend a significant portion of household income to buy it. Imagine if we used capital markets to issue water bonds to improve water infrastructure, or clean cooking bonds to finance cleaner energy solutions. The impact of women’s lives would be transformative.

Building the bridge together

In this regard, we have continued to support our partners in bringing innovative financial tools to market to mobilise gender-responsive finance. For instance, in 2021, we supported Banque Central Populaire in Morocco issue the first gender bond in Morocco, raising about US$ 20.4 million to provide 17,080 microcredit loans to economically disadvantaged urban and rural women.  We also provided technical assistance for a US$ 10million green bond issuance by Burn Manufacturing to support clean cooking in Sub-Saharan Africa. Most recently in 2024, we supported the Tanga Urban Water Supply and Sanitation Authority in Tanzania in the first ever water green bond in Africa, aimed at improving sustainable water supply and environmental conservation within Tanga city and nearby townships. To support more of these issuances FSD Africa in collaboration with UN Women, BII, and FSD Network designed the gender bonds toolkit to equip both issuers and investors with the tools they need to make gender-responsive finance a reality.

As we champion for more incentives and instruments to mobilise gender-responsive finance through capital markets, we recognise that proper impact measurement and management are crucial for understanding the outcomes and impact of gender-responsive finance through capital markets, requiring accurate data collection and performance insights. Globally, we see that gender-disaggregated data is sparse and weak; thus, these issuances present an opportunity to strengthen the collection and management of gender-disaggregated data. As a guide, issuers and investors can look to the gender bonds toolkit outlines considerations and use-case examples to demystify the post-issuance reporting stage.

At FSD Africa, we are championing for capital markets as an enabler of gender-responsive finance. By sharing our experiences, insights and best practices with issuers and investors, we can significantly boost gender-focused capital for African businesses.

[1] https://www.ifc.org/content/dam/ifc/doc/mgrt/2020-12-call-for-insights-e-publication.pdf

[2] Gender refers to the socially constructed roles, behaviours, and expectations that societies assign to individuals based on their perceived sex.  Gender disaggregated data separates information based on these societal roles and expectations. It goes a step further to explore the ‘why’.

 

Empowering the next wave of climate entrepreneurs

Harnessing the immense power of Africa’s innovative young talent is critical for a successful green transition on the continent. Triggering Exponential Climate Action (TECA) hinges on directing this talent intentionally toward our generation’s most pressing challenges – climate change and biodiversity loss. Last year’s inaugural “TECA wave”, implemented by BFA Global and funded by FSD Africa, saw 30 Fellows supported to launch seven new ventures solving for challenges in the blue economy (used here to mean sustainable use of natural water resources for economic growth, improved livelihoods, and jobs while preserving the health of the environment).

This year, we and BFA Global have been joined by a powerhouse team of organisations resulting in the new Africa Blue Wave Coalition. IUCN, through a partnership with the Canadian Government, is co-financing the Africa Blue Wave alongside us, and Ocean Hub Africa (OHA) has come on board as blue economy venture building experts. Through this collaboration, TECA has recruited 44 new talented and energetic Fellows from 12 different African countries to take on the challenge of building climate solutions.

As has become the tradition, the new wave kicked off with the “huddle”, a 4-day in-person convening of TECA Fellows and venture builders, that took place in Watamu, Kenya, in March 2024. I had the pleasure of joining the Fellows for this unique opportunity to immerse ourselves into blue and green economy challenges as well as engage with and learn from one another at the very start of the TECA journey. Green economy, in this case, refers to the sustainable use of terrestrial landscapes for economic growth, improved livelihoods, and jobs while preserving the health of the environment and boosting biodiversity.

Watamu, a small coastal town in Kilifi County, Kenya, not only boasts a stunning coastline, but it is also home to Mida creek, one of the most productive mangrove ecosystems in the world, supporting livelihoods, marine-life and an impressive diversity of bird and animal species. This served as a perfect location for the TECA Fellows to gain a deeper understanding of the challenges faced by fisher folk, farmers, conservationists, and others whose livelihoods depend on this protected ecosystem.

Through the support of Kenya Marine & Fisheries Research Institute (KMFRI), we had the pleasure of visiting both green and blue economy players in the region. These included an aquaculture and conservation self-help group (Umoja) practicing sustainable marine fish farming and mangrove nursery establishment and rehabilitation; and beach management units (BMU) at landing sites in Takaungu as well as Kuruwitu, where we met with BMU officials and groups undertaking fishing, extraction of coconut oil, mangrove restoration, plastic recycling, and coral restoration, among other activities.

The decision to focus this second TECA wave on both green and blue economy solutions was validated by the clear complementarity in the spectrum of opportunities for innovation identified by the fellows. This was further highlighted when we had the opportunity to visit a Fellow from the first TECA wave. Fardosa Mustafa launched Registree in 2023 with a goal to empower mangrove conservation communities in the coastal region through digital tracking of mangroves and carbon accounting. So passionate about this work, Fardosa moved from her home in Nairobi to Watamu after her time in the TECA programme to focus on better understanding the needs of the communities she was supporting. In doing so, she has gained a deeper understanding of their needs and pivoted her business model to supporting sustainable agricultural practices in the coast; an exciting shift from blue to green within the same region.

Despite having completed the TECA process, the team at BFA keep a close eye on Registree and others who have launched their start-ups through the programme, providing input and support where needed. Dr. Mathew Egessa, another TECA graduate, joined the team in Watamu to speak with the current cohort of fellows about his journey building Vua Solutions. He also had to opportunity to check in with venture builders and gain input into challenges he faced in the business highlighting the importance of ongoing relationships and expertise that the TECA process provides.

Fardosa and Mathew’s stories exemplified for me the importance of the kind of high touch support provided by the TECA team. To adequately support these entrepreneurs requires time, patience, adaptability, and inevitably capital investment. It requires for all players within the climate space – educators, entrepreneurs, regulators, venture builders, experts, and investors – to think differently about how we support innovation.

The huddle left me with the feeling that, although there is still a lot of work to be done in building solutions that address the needs of communities in Africa at the same time as mitigating the impact of climate change, there is hope. The 44 TECA Fellows I met in Watamu were passionate about building these solutions and incredibly energised about the opportunity to work with experts who were ready to provide the support needed.

As FSD Africa, we are excited to be joined on this journey by IUCN and OHA, recognising the importance of partnership and collaboration towards Africa’s green transition.

Why African capital markets need an unshakeable foundation

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

Regulation is an art, not a science

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

Challenges in African markets

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

The benefits of well-regulated markets

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

The broader context

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

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

The role of FSD Africa

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

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

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

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

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

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

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

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

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

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

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

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

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