Country: Sudan

Private equity investment guide and market study

In collaboration with the East African Venture Capital Association (EAVCA) and the International Finance Corporation (IFC), we have developed a Private Equity (PE) Investment Guide with the objective to deepen the understanding of private equity structures among pension fund managers and their trustees to unlock more investments into the asset class. The guide mainly covers three key areas – understanding the asset class and where it sits alongside other asset classes, why and how to invest in PE’s and an overview of the benefits and risks of investing in private equity.

The development of the guide was informed by a market study report that sought to investigate the low uptake of investment by pension schemes. The report cites the knowledge gap on both pension fund and regulatory side and the absence of regulatory oversight of the PE Fund Managers by local regulators as some of the key impediments for Pensions seeking to invest in PE Funds. The study surveyed 18 Pension Schemes from Kenya, Rwanda, Tanzania and Uganda alongside 15 PE General Partners from Ethiopia, Kenya and the Ud Kingdom as well as 3 Pension regulators in Kenya, Uganda and Tanzania.

Across developed markets the pension industry is the backbone of investments, supporting asset classes such as private equity with the patient capital to deploy in growing businesses and there is a need to up skill both regulators and pension fund trustees to foster a greater understanding of the benefits of investing in PE Funds.

Regulating for innovation

Innovation has the ability to create opportunities, improve inefficiencies, increase competition, drive scale and improve the reach and value of financial products and services. However, innovation also comes with risk, and due to the novel nature of innovation, it is often not fully accommodated in current regulatory frameworks.

Given that innovation brings with it both benefits and risks, it is the regulator’s role to proactively consider the trade-offs between the two, which requires the regulator to balance its mandate to develop the market with its mandate to protect consumers.

The first note explored approaches to regulating for responsible market innovation, with particular focus on the test-and-learn approach as well as the concept of the regulatory sandbox, underpinned by it. Drawing on case study country examples, it explores the potential benefits, prerequisites and considerations required by regulators to effectively implement approaches to encouraging innovation in their markets.

This focus note unpacks the range of tools available to financial sector regulators to regulate for innovation in the changing financial services landscape. It serves as a toolkit for regulators on how they can better encourage and facilitate innovation in their markets, whilst protecting consumers thereby fulfilling both market development and consumer protection mandates.

This “living” framework has its genesis in insurance; however, its applicability spans the entire financial sector, striving to guide decision makers regardless of the jurisdiction’s divisions of roles, or the regulatory and supervisory model in place.

Read the report here.

Developing and impact-oriented measurement system

Financial sector deepening programmes (FSDs) promote the sustainable, pro-poor development of complex financial markets. To do this they work with market actors and policy-makers, and deploy multiple means of support, ranging from funding to research, while continually adapting to market changes. FSDs face increasing pressure to show results while implementing complex, multi-faceted market development programmes. Monitoring and evaluation practices have to keep pace with this changing context and respond robustly to more demanding expectations, particularly the need to measure medium-term market system outcomes and longer-term impacts on poverty reduction.

This impact-oriented measurement (IOM) guidance paper has two key objectives that are designed to assist FSDs in their measurement processes.

Savings groups and consumer protection: risk mitigation through community-based structures

This case study explores the role that Savings and Internal Lending Communities (SILC) in Togo play in mitigating risks. The emerging experience in Togo suggests that community-based approaches are a promising consumer protection mechanism for Savings Groups. While the sustainability of SILC Committees is not yet clear, they have demonstrated the potential for Savings Groups to come together to make decisions, solve problems, and take collective action.

Download the SEEP Network case study here.

The potential of the cell captive structure for sub-Saharan Africa

Our partner for our Risk, Remittances and Integrity Programme – Cenfri, produced a study that explores the potential role of cell captives in the development of insurance markets in sub-Saharan Africa (SSA).

What is cell captive insurance?

Cell captive insurance is a relatively new concept that grew out of the captive insurance concept. Captive insurance is a model where a corporate entity self-insures its own assets by setting up its own dedicated insurance license. The cell captive concept follows a hub-and-spoke model whereby one central licensed insurer (referred to as the “sponsor” or “promoter”) forms ring-fenced cells issued to other organisations (referred to as the “cell owners”) for the insurance of the cell owner’s own assets or the insurable risks of its client or membership base.

The cell captive insurer is accountable for all regulatory compliance and holds the insurance license that covers the business of all the cells. The cell captive structure thus emerged as a way entity to access the benefits of captive insurance without setting up its own insurance company. Cell captives have been one of the most important steps in the evolution of the captive insurance space and have become an integral component of the self-insurance market in many of the established captive domiciles.

A cell captive in practice

In Ghana, a recent insurance diagnostic study by Cenfri (2018) showed that certain sectors of the economy (such as oil and gas or the energy sector) are unable to fully access appropriate insurance policies from the local insurance industry due to the market’s lack of capacity to cover large, specialised risks. This situation is likely to continue with the expected increase in the growth of the Ghanaian oil and gas sector. At the same time, local content requirements imply added costs and procedures for local corporates to access foreign cover. Cell captive arrangements could, in principle, address this constraint by allowing corporates to capitalise a cell accounto self-insure their risks via a cell captive arrangement, tailoring the coverage to meet their specific needs. Should this be the case, the cell captive arrangement would be hosted by a local insurer licensed for this purpose, with centralised reinsurance arrangements as appropriate, and would serve to crowd in capital from the large players in the extractive industries for each cell.

At present, cell captives, have yet to be extensively explored or implemented across the SSA region. Cell captive innovations in SSA are largely concentrated in S.Africa, Mauritius, Namibia and Seychelles.  An example from S. Africa is the SA Taxi which is a company that provides credit to finance the purchase of minibus taxis. SA Taxi decided to branch out into the provision of insurance cover to its clients. It wanted autonomy in the design of its offering to fit the realities of its particular customer base but lacked in-house insurance experience and expertise and therefore acquired a cell with trong>Guardrisk, the largest South African cell captive insurer, rather than set up its own insurance license.

Read more on how cell captives could stimulate insurance markets in sub Saharan Africa here.

Women’s empowerment and savings groups: monitoring and results measurement toolkit

Savings Groups are a pillar of gender equality and women’s empowerment programming. This learning series examines the pathways between Savings Groups and women’s empowerment, the evidence with respect to various outcome areas, and how women’s empowerment outcomes can be enhanced and better sustained through Savings Groups.

CAHF 2017 housing finance in Africa yearbook (8th edition)

FSD Africa’s partner, the Centre for Affordable Housing Finance has produced the 2017 Housing Finance in Africa Yearbook.

The eighth edition of the Housing Finance in Africa Yearbook covers 54 African countries and five regions – an addition of three country profiles this year. CAHF have again sought out new data and refined our approach to the affordability graphs. CAHF have been monitoring the news so that the 2017 Yearbook reflects the current situation of housing finance markets on the African continent.

Download the yearbook here.

CAHF housing finance in Africa yearbook 2016 (7th edition)

FSD Africa’s partner, the Centre for Affordable Housing Finance has produced the 2016 Housing Finance in Africa Yearbook.

The seventh edition of the Housing Finance in Africa Yearbook covers 51 African countries and five regions – an addition of three country profiles this year. CAHF have again sought out new data and refined our approach to the affordability graphs. CAHF have been monitoring the news so that the 2016 Yearbook reflects the current situation of housing finance markets on the African continent.

Download the yearbook here.

CAHF housing finance in Africa yearbook 2015 (6th edition)

FSD Africa’s partner, the Centre for Affordable Housing Finance has produced the 2015 Housing Finance in Africa Yearbook.

Innovation in housing finance –in terms of products, players, and approaches, not to mention target markets – is a key feature across the continent, creating new opportunities for investment and delivery. As both local and international investors chase growth opportunities in a sluggish global economy, they are employing diversification strategies to manage the risks of their traditional targets – and in this, residential property is increasingly becoming an option. And while established players are getting better at what they do, new players are adding to the mix and competing for opportunities.

Investors are faced with a paradox, however. By their very nature, they are drawn to the high income markets. It is in these markets that they can price adequately for risk and realize the returns they seek. However, the real story – the scale opportunity just waiting to be cracked – is in the lower income market segments. The arguments for investment in residential – high urbanization rates, a growing middle class, a shortage of supply – these are all arguments for moving down market into the uncharted waters of affordable housing. Can investors and developers do it? In 2015, this is a very real focus.

Five stories characterize Africa’s housing finance markets in 2015:

1. Innovation in financing
2. Growing awareness of the opportunity in residential
3. The identification of niche markets and an appreciation of the affordability challenge
4. Policy & regulatory evolution to match investor interest
5. Growing experience and investor sophistication

Of course, the challenges are not insignificant. But increasingly, investors and developers are noting that the potential benefits outweigh the risks. And, as governments come to appreciate the potential that this interest offers, their efforts to streamline development processes and enable their local housing markets to grow are creating new opportunities that are beginning to change the face of African cities.

This is the sixth edition of the Housing Finance in Africa yearbook. Since last year, CAHF have added five country profiles and one regional profile bringing the total to 48 country profiles and five regional profiles. CAHF have again sought out new data sources, and rethought their approach to the affordability graphs. CAHF have been monitoring the news so that this yearbook reflects the current situation of housing finance markets on the African continent in 2015.

The Yearbook is intended to provide housing finance practitioners, investors, developers, researchers and government officials with a current update of practice and developments in housing finance in Africa, reflecting the dynamic change and growth evident in the market. It is hoped that it will also highlight the opportunities available for new initiatives, and help practitioners find one another as they strive to participate in the sector. While the general aim of the Yearbook is to offer a broad overview of housing finance and housing development in Africa, special emphasis is placed on the key challenge of housing affordability, and the critical need for housing products and finance that are explicitly targeted at the income profiles of the majority.

This has been a desktop study. Using the CAHF’s research as baseline material, further information on more recent developments was accessed from media reports, journal articles and practitioner websites. In some cases, material was shared with in-country practitioners. Of course, the yearbook is not comprehensive, neither in the scope of countries covered nor the data provided. It is intended as an introduction, with the hope that the detail provided will whet the appetite for more. CAHF invites readers to provide comment and share their experiences on what they are doing in housing finance in Africa.

Download the yearbook here.

An empirical risk assessment of savings groups

FSD Africa’s partner, the SEEP Network has published a new Learning Brief. The purpose of this risk assessment is to identify and assess the main risks that affect Savings Groups – based on the frequency and severity of negative outcomes – and ultimately inform the development of targeted consumer protection initiatives for Savings Groups. The study – based on a survey of 1,600 groups, individual members, trainers and community stakeholders in four Sub-Saharan African countries – identifies and explores several risk factors related to group survival, membership, training and support, governance, saving and lending, and safety of group assets.

The study examines several observed risks that merit attention from stakeholders who are creating and supporting Savings Groups; and the findings serve as an initial evidence base on which to monitor, investigate and address the risks faced by Savings Groups.

The learning brief can be downloaded here.