Follow us

Frontclear (FCC)

Overview

About

An inclusive money market eco-system is a pre-condition to stable capital markets and real economy development. Without it, financial intermediaries and financial markets struggle to perform their core role of converting household savings into loans to companies. This is especially the case in emerging and frontier markets where the financial sector is bank-centric and bond markets are under-developed. Frontclear’s investments are designed to address this, enhancing the domestic banking sector and making it cheaper and easier for African consumers to transact.

Investment Details

Name

Frontclear (FCC)

Tagline

Contributing to economic growth and financial stability through inclusive and liquid money markets

Sector

Capital Markets

Location

Egypt, Togo, Cote D’Ivoire, Nigeria, Senegal, Uganda, Tanzania, Zambia, Ethiopia

In portfolio since

2019

Our role

  • Frontclear offers USD guarantees to enhance the value of local currency assets. Local banks use these guarantees to access the interbank market, a network where banks exchange funds and risk. Guarantees are extended against collateral denominated in local currencies, which are often not considered acceptable collateral for interbank trades
  • FSDAi invested in Frontclear to improve the efficiency and depth of money markets in Africa, as well as the level of private sector participation. Frontclear achieves this through freeing up “dead” or illiquid capital (examples include T-bills and bonds) held by tier 2 and tier 3 banks
  • FSDAi invested in Subordinated Notes during the second financial close to enable Frontclear to restructure its existing and raise capital.

Our investment

Committed capital: £1.54 million

Instrument: Subordinated notes

Purpose and target market

  • Frontclear’s work with interbank markets improves liquidity and makes capital more accessible, therefore driving growth for entrepreneurs. The interbank market is important because, alongside deposits and the wholesale market (e.g. bonds), it can be a very attractive source of capital for banks. If interbank markets function well, banks can get access to capital instantaneously and on more flexible terms than in the wholesale markets.
  • FSDAi’s investment also played a significant role in enabling Frontclear to strengthen its role across SSA. Specific impacts achieved through the investment include:
    • Launch of Tradeclear Uganda in June 2022 with US$ 30m in gross notional guarantees which is a multi-bank plug-in interbank guarantee structure.
    • In Ethiopia and Rwanda, Frontclear has been conducting a Money Market Diagnostic Framework (MMDF), a full review of the legal and regulatory framework and identifying initial reforms, knowledge development through classroom-based delivery of the Frontclear Academy and facilitating the establishment of the country

Impact to date

25 Countries in which Frontclear has extended activities during 2021 strengthening emerging markets economies responding to Covid-19.

47 Volume of guarantees issued to African banks since inception (balance to other emerging market countries.

47% (including Egypt) of outstanding guarantees are to African counterparties

Mobilized: USD 3,486m Gteed: $942 million Cumulative 6-year mobilised funding on the back of issued guarantees. Raised in funding since 2015

Investee contacts

Frontclear Management B.VMauritskade 63, 1092 AD Amsterdam, The Netherlands
+31 (0)20 5300974
info@frontclear.com

FSD Africa contact

Riverside Green Suites (Palm Suite), Riverside Drive, Nairobi
FSDAi-info@fsdafrica.org

Updated: October, 2022