Partner Organization: FMO

Exploring new frontiers in fintech investments in East Africa 2018

FSD Africa in partnership with East Africa Venture Capital Association (EAVCA), Intellecap and FMO have published the findings of their sector study on the investment opportunities in FinTechs within East Africa.

The report’s core explores the funding options currently available for the sector: ranging from debt offering, grants and equity provision. With the increased success of FinTech players in East Africa, investors are keen to understand the opportunities available for capital deployment in East Africa’s FinTech space. The report assesses the financing options currently available in the market for target investors. It also explores the risks associated with the sector and how other investors deal with such risks. Finally, the report has explored returns available for FinTech investors in East Africa, to provide guidance on the region’s earnings potential.

Some highlights from the report:

  • Africa is the second fastest growing region for Fintech investments, with an 87% Compound Annual Growth Rate (CAGR), after Asia Pacific;
  • US$ 200 million was raised for Fintech businesses in East Africa in 2017;
  • 98% of funds raised in East Africa went to Kenyan companies;
  • Lending segment of Fintech sector attracted the highest number of funds raised between 2010 – 2017; and
  • Equity financing accounted for 71% of total funds raised; debt financing 6% and hybrid financing 23%.

Green bonds programme Kenya – annual report 2017/18

Kenya Green Economy Strategy and Implementation Plan (GESIP) 2016–2030 has committed to investing $23.5 billion in Kenya’s green growth path. Moreover, investor demand for green bonds is getting stronger globally due to increasing evidence that “green” factors have a positive impact on long-term financial returns.

The Green Bonds Programme Kenya (GBPK) was launched in March 2017 with the aim of catalysing the market for green bonds.  Working together on this programme all partners recognise the outcomes will be larger and more sustainable – leading to a green economy for Kenya’s future generations.

Following the foundations laid by the Green Bonds Programme Kenya, the National Treasury has indicated that its debut sovereign green bond will be issued during the fiscal year 2018/19. This will make Kenya the first country in East and Central Africa to issue

FSD Africa completes its investment in African local currency bond fund

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FSD Africa (“FSDA”) announces the completion of its £15.3 million ($20.3 million) investment in the African Local Currency Bond Fund (“ALCBF”).

Since FSDA announced its intention to invest in the fund in May this year, ALCBF has continued making good progress.

It has invested a total of approximately $10 million in four more bonds – including in Nigeria and Lesotho, extending its geographic reach and its financial support for developmentally important sectors, such as agriculture and housing.  ALCBF entered Côte d’Ivoire with a $ 3.1 million bond investment in Alios, a regional leasing company. The bond proceeds will benefit the company’s operations in Burkina Faso and Mali, demonstrating that there are opportunities for bond financing even in fragile and conflict affected markets.

ALCBF has also received funding commitments from lenders totalling $40 million – including the International Finance Corporation ($20 million), Calvert Foundation ($10 million) and the Dutch development bank,
This additional funding has enabled the fund to establish a permanent presence in West Africa, where it has now opened an office in Lagos, Nigeria.

As such, with invested capital of $40 million and a total fund size of over $100 million, ALCBF is strongly positioned to fulfil its objective of developing capital markets across Africa, by helping companies issue bonds in local currencies and by building technical capacity in the markets where those bonds are being issued.

As an equity investor in the fund, FSDA will join the Board of ALCBF.  Completion is subject to satisfaction of certain conditions precedent, expected shortly

FSD Africa invests £15.3 million in the African local currency bond fun

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PRESS RELEASE – FOR IMMEDIATE PUBLICATION

Nairobi, 9th May 2017 – Financial Sector Deepening Africa (FSD Africa) and KfW Development Bank announce that they have agreed terms under which FSD Africa will invest £15.3 million in the African Local Currency Bond Fund (ALCBF). When fully subscribed, this fresh injection of capital will take ALCBF’s total equity to £53m, substantially increasing the fund’s investment firepower and thus enabling it to step up its engagement with developmentally important industry sectors such as green energy and housing and take on investments in fragile and conflict affected states.

ALCBF was established by KfW on behalf of the German Ministry for Economic Cooperation and Development (BMZ) in 2012 to support the development of African bond markets and improve private sector access to long-term and local currency financing.

Alongside this investment in the equity of the fund, FSD Africa has also agreed to contribute £500,000 towards ALCBF’s Technical Assistance Facility. FSD Africa’s investment is part of a comprehensive and continuing strategy by ALCBF to increase significantly its capital base through equity and debt, and diversify its funding sources.

Mark Napier, Director of FSD Africa, said: “We are proud to become the African Local Currency Bond Fund’s second shareholder. The lack of long term, local currency funding is one of the most serious problems in Africa’s financial markets.  It means that good projects don’t get funded and much-needed jobs don’t get created.  We were attracted by the African Local Currency Bond Fund because of its pan-African reach, its ability to generate solid financial returns from good quality investments, and because of its energetic commitment to supporting the development of capital markets by providing technical assistance alongside investment capital.”

Capital markets are an important medium for channelling savings into investment in local economies, but in most African countries they are not yet playing a significant role. Where domestic capital markets do not work and long-term local currency finance is not available, companies are forced to rely on hard currency loans. Foreign currency loans expose borrowers and sometimes an entire financial system to exchange rate risk: when local currencies weaken, foreign currency loans can quickly become very expensive to repay and when the borrower is a financial institution, that can create risks for the financial system as a whole. Low income households and small businesses are often among those most affected by systemic financial crises.

Bond issuance not only means that companies gain access to investment capital. It also means that local investors – typically, pension funds and insurance companies – get the opportunity to invest for the long term in their own currency, thus ensuring that their long-term liabilities, such as pension pay-outs, can be matched.

ALCBF has been investing in Africa for four years, during which it has played a key role in bringing 19 issuances to market for 13 companies in 7 countries, investing a total of £33m. The current outstanding portfolio is £24m.  All investments to date have been in the financial sector, including micro-lenders, Micro, Small and Medium Enterprises (MSME) lenders, leasing companies and lenders into the health, education and housing finance sectors.

ALCBF is managed by Lion’s Head Global Partners (LHGP) Asset Management LLP (LHGP AM), an investment and advisory firm regulated by the UK Financial Conduct Authority with offices in London and Nairobi.  LHGP AM was appointed as Fund Manager to ALCBF in May 2015.  Bim Hundal, Chairman of LHGP AM, says: “We are pleased and excited to work with KfW and FSD Africa on this ground-breaking initiative. Providing local currency financing to African companies and institutions puts ALCBF at the forefront of capital markets innovation.”

FSD Africa’s investment is expected to increase the number and size of bond issuances in SSA and reduce the cost of capital for borrowers. Because the fund never buys more than 50% of a bond, the investment should mobilise (or crowd in) significant amounts of domestic capital from local institutions: in 2016, for every £1 invested by the fund in local currency bonds, £10.6 was invested by third parties.

FSD Africa’s investment will also help ALCBF to continue its work of strengthening technical capacity in the market, supporting local issuers with advice and building the skill set, standards and practices of market intermediaries such as placement agents and investment banks.

This marks FSD Africa’s largest deployment of investment capital to date and is consistent with its objective of driving financial market transformation through capital investment as well as through grant funding.

Johannes Feist, Head of Division – Financial Systems Development, Southern Africa and Regional Funds for KfW, said: “We are delighted to welcome FSD Africa’s participation in the African Local Currency Bond Fund.  FSD Africa’s equity investment, alongside KfW’s, can be leveraged with senior debt which means the fund can deliver capital market development impact more quickly and in more markets across Africa.”

Ends.

Note to editors

About KfW

KfW Development Bank has been helping the German Federal Government to achieve its goals in development policy and international development cooperation for more than 50 years. In this regard, KfW Development Bank is both an experienced bank and a development institution with financing expertise, an expert knowledge of development policy and many years of national and international experience. On behalf of the German Federal Government, and primarily the Federal Ministry for Economic Cooperation and Development (BMZ), KfW Development Bank finance and support programmes and projects that mainly involve public sector players in developing countries and emerging economies – from their conception and execution to monitoring their success.

Contact: Johannes Feist, KfW, +49-69-7431-3519 or Johannes.Feist@kfw.de.

For more information about KfW Development Bank’s activities and current updates follow:

Twitter: @KfW

Website: www.kfw-entwicklungsbank.de.

About FSD Africa

FSD Africa is a non-profit company which aims to increase prosperity, create jobs and reduce poverty by bringing about a transformation in financial markets in SSA and in the economies, they serve. It provides know-how and capital to champions of change whose ideas, influence and actions will make finance more useful to African businesses and households. It is funded by the UK aid from the UK Government.

Contact: Mark Napier, FSD Africa, +245 701 773 028 or mark@fsdafrica.org.

For more information about FSD Africa’s activities and current updates follow our social media platforms:

Twitter: @FSDAfrica

Linkedin: Financial Sector Deepening Africa (FSD Africa)

Website: www.fsdafrica.org

Kenya green bond programme kicks-off with strong backing from banking industry and development finance community

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Nairobi, Friday 31st March 2017 – The Kenya Bankers Association (KBA), Nairobi Securities Exchange (NSE), Climate Bonds Initiative (CBI) and Financial Sector Deepening Africa (FSD Africa) in conjunction with the FMO – Dutch Development Bank and the International Finance Corporation (IFC) have today launched the Kenya’s Green Bond programme. The programme, which is coordinated by KBA under its Sustainable Finance Initiative (SFI), is endorsed by the Central Bank of Kenya (CBK), Capital Markets Authority (CMA) and the National Treasury.

During the launch, KBA, the NSE, CBI and FSD Africa signed a Cooperation Agreement to support the development of a green bonds market in Kenya.  FSD Africa has committed USD 600,000 over a period of three years, to fund the programme with the objective of aiding Kenyan banks and corporates to be in a position to tap the growing investor demand for green investments.

Through the partnership and funding from FSD Africa, a technical support programme will be implemented that will enable the partners to develop a pipeline of potential bond issuers and support demonstration green bond issuance from leading banks and corporates in Kenya. In addition, it will enable the development of a community of Kenyan-based licensed verifiers and support KBA’s efforts in building capacity locally to catalyze similar programmes across East Africa. In addition to the FSD Africa funding, FMO had earlier committed USD 350,000 to support KBA develop the framework to create the industry’s first pooled gbond facility. The facility that would allow KBA member banks, especially Tier 2 and Tier 3 banks, and corporates to take advantage of wholesale debt capital markets.

The launch of the Kenya Green Bond Programme comes at a time when African countries are gaining momentum to align with the burgeoning activity within the green finance space. Kenya, Nigeria, Morocco, Egypt and South Africa are among countries that have made strides to establish standards, harmonize public and private sector efforts as well as build capacity within the green economy. Globally, based on the 5th annual State of the Market Report by HSBC and detailed by CBI in a recent 2016 report, $694 billion is said to be climate aligned bonds. Out of the $694 billion, $ 118 billion are labelled as green bonds. A green bond label, enables investors to identify climate aligned investments and thus reduce friction in the market, which will in turn facilitate growth in climate aligned investments.

During the launch, the CEO of KBA, Habl Olaka said: “We are very pleased and excited to announce this partnership. This alliance has given us the opportunity to work closely together as a sector in developing Kenya’s green finance market through the green bond programme. One of KBA’s main objectives is to develop and sustain best practices that will inevitably strengthen financial structures in Kenya. FSD Africa, FMO, IFC, CBI and the NSE have all focused over the years on growing sustainable finance practices in the financial sector and this strongly complements our objective.”

The Chief Executive of NSE, Geoffrey Odundo noted: “The Exchange is committed to developing a vibrant green market for this region; we aim to create an environment that will allow the market to prosper in a secure and transpar­ent way. Through the NSE, issuers and investors will have a platform where they can come to­gether and fulfil their green objectives. The Kenya Green Bond Programme is an innovative tool that will promote economic and climate resiliencyntry.”

Ahead of the signing ceremony, the Director, FSD Africa, Mark Napier said: “It is expected that this programme will improve access to a complementary source of longer-term capital alongside traditional, shorter term bank loans, while contributing to the financing of ‘green’ investments and improving the environment. It will further support the national agenda that seeks to reinforce Kenya’s role as a regional leader in financial services as articulated by Vision 2030 and Kenya’s Green Economy Strategy and Implementation Plan (GESIP).”

In agreement, Sean Kidney, CEO of Climate Bonds Initiative also said: “We are very excited to be able to work with our partners to grow a green bonds market in Kenya. This is going to be part of delivering lower cost capital to green projects, and developing capital markets in Kenya. In this year of sovereign green bonds Kenya is taking action and issuing will enhance its leadership positioning in Africa and provide a positive example to other nations loe finance options.”

Ends.

Note to editors

About Kenya Bankers Association

KBA (www.kba.co.ke) was founded on 16th July 1962. Today, KBA is the financial sector’s leading advocacy group and banking industry umbrella body that represents total assets in excess of USD 37 billion. KBA has evolved and broadened its function to include advocacy on behalf of the banking industry, and championing financial sector development through strategic projects such as the launch of the industry’s first P2P digital payments platform PesaLink.  In line with the Government’s policy on public-private partnerships, KBA and Central Bank of Kenya have implemented key projects such as modernization of the National Payments System through the Automated Clearing House, implementing the Real Time Gross Settlement System (RTGS), and the Kenya Credit Information Sharing Initiative. The KBA members are comprised of commercial banks and deposit taking microfinance banksg>Nairobi Securities Exchange (NSE)

The NSE is a company established under the Companies Act, Cap 486 of the Laws of Kenya (as amended) and is licensed by the Capital Markets Authority to promote, develop, support and carry on the business of a securities and derivatives exchange and to discharge all the functions of a securities and derivatives exchange under the applicable Laws of the Republic of Kenya.

About the Climate Change Initiative (CBI)

The CBI is a private company limited by guarantee, established under the Companies Act 2006 of the United Kingdom and registered as a charity in England and Wales, and mandated to work for the preservation and conservation of the environment for the public benefit.

About FSD Africa

FSD Africa is a non-profit company which aims to increase prosperity, create jobs and reduce poverty by bringing about a transformation in financial markets in SSA and in the economies, they serve. It provides know-how and capital to champions of change whose ideas, influence and actions will make finance more useful to African businesses and households. It is funded by the UK aid from the UK Government

For more information about FSD Africa’s activities and current updates follow our social media platforms:

Twitter: @FSDAfrica

Linkedin:  Financial Sector Deepening Africa (FSD Africa)

Website: www.fsdafrica.org

Email: evans@fsdafrica.org

For media enquiries please contact:

Financial Sector Deepening Africa (FSD Africa)

Lara Cornaro

Head of Communications

lara@fsdafrica.org

 

Kenya Bankers Association

Nuru Mugambi

Director of Communications and Public Affairs

Phone: +254-20-2221704/2224014

Email: nmugambi@kba.co.ke

 

Nairobi Securities Exchange Ltd.

Waithera Mwai-Ireri

Head of Brand and Corporate Affairs

Tel: +254 (020) 283 1000

Email: wmwai@nse.co.ke

Website: www.nse.co.ke

 

Climate Bonds Initiative

Andrew Whiley

Communications Manager

Phone: +44 (0) 7506 270 943

Email: andrew.whiley@climatebonds.n