Tag: FSDAi

From $3M to a $70M Climate Fund: What building Africa’s climate investment pipeline actually takes

Posted on by Kihingu Inc

Africa’s climate finance gap is often framed as a question of scale. Hundreds of billions of dollars are needed each year, yet only a fraction flows to the continent.

But focusing only on the quantity of capital misses a quieter constraint upstream: the shortage of fund managers with the track record, institutional structure, and operational capacity to deploy early-stage climate capital effectively across African markets.

Capital cannot flow at scale if the managers capable of deploying it do not yet exist, or if they lack the credibility required to attract institutional investors.

This is the challenge FSD Africa Investments (FSDAi) had in mind when we invested $3 million in Persistent Energy Capital in 2022.

Backing the team before the fund existed

Persistent had already spent more than 14 years building and investing in climate-focused businesses across Africa. Their portfolio companies had improved the lives of more than 10 million people, created over 20,000 jobs, and helped avoid more than 2 million tonnes of CO₂e emissions.

The team knew how to identify, build, and scale climate ventures. What they did not yet have was a formal fund structure capable of attracting institutional capital and scaling that model.

FSDAi’s $3 million commitment in 2022 came before the fund existed. The capital was deployed directly into climate businesses identified and supported by Persistent across sectors including solar energy, e-mobility, energy efficiency, and sustainable agriculture. But FSDAi’s role went beyond early capital, working closely with the Persistent team to establish the institutional infrastructure required to manage a larger, institutional-grade fund.

Those investments have now been warehoused and transferred into the newly launched Persistent Africa Climate Venture Builder Fund. The fund launches not with a blank slate, but with an existing portfolio already built, tested, and validated, and a team with the systems, structures, and capability required to absorb and deploy institutional capital at scale.

Most funds don’t begin this way. It reflects FSDAi’s integrated approach to investment, combining capital with manager capacity strengthening and ecosystem building to establish a track record and create the conditions for institutional investors to follow.

“For many emerging fund managers, the challenge isn’t just proving a strategy, but building the capacity to manage institutional capital at scale,” said May Yego, Investment Manager at FSDAi. “Our work with Persistent reflected FSDAi’s mandate to test, accelerate and mobilise —  combining early capital with hands-on support to strengthen investment processes, governance and readiness for larger capital. That integrated approach de-risked the opportunity and positioned the fund to attract follow-on investors.”

A fund designed to crowd in capital

The Persistent Africa Climate Venture Builder Fund has now reached a $52 million first close, against a $70 million target.

FSDAi’s $10 million anchor commitment sits alongside the Nordic Development Fund (NDF) and the African Development Bank’s Sustainable Energy Fund for Africa (SEFA) as co-anchor investors.

Additional investors include JICA, deploying capital under its new Blended Finance Window for the first time, alongside the Soros Economic Development Fund, Impact Fund Denmark, and the Schmidt Family Foundation.

This investor base is no coincidence. It reflects a fund structure intentionally designed by FSDAi and Persistent to give institutional and commercial investors the confidence to follow catalytic capital.

Through a blended finance architecture that provides first-loss protection and priority returns, the structure reduces the perceived risk of allocating to an early-stage African climate fund and opens the door for a broader set of investors to participate.

This first close demonstrates that early-stage climate funds in Africa can attract institutional capital when both the manager and the fund structure are intentionally built to meet investor expectations. The result is a vehicle designed not only to deploy catalytic capital, but to crowd in significantly larger pools of private investment.

A venture builder for climate businesses

The fund invests from pre-seed through Series A across three transition themes: energy, agriculture, and resources. It also retains the flexibility to deploy follow-on capital to support the growth of high-performing portfolio companies.

Alongside the investment fund sits a $5 million Venture Building Facility, funded by NDF and FMO, which provides operational support to portfolio companies. This combination of capital and hands-on venture support makes the model more than a fund. It is designed as a company-building engine for climate innovation in Africa.

The impact ambition

Over the life of the fund, the Persistent ACV Fund is targeting:

  • 17 million tonnes of GHG emissions mitigated
  • 7 million beneficiaries reached, with 50% women
  • 60,000 direct jobs created, with 50% women
  • 420,000 households gaining new or improved electricity connections
  • $450 million in downstream investment catalysed

These are ambitious targets.

But they are grounded in a foundation many early-stage climate funds do not yet have: a proven team, an existing portfolio, and over a decade of operational experience building climate ventures across Africa.

Gender inclusion is also embedded in the design of the strategy. Persistent’s portfolio construction aligns with the 2X Challenge, ensuring that women are both beneficiaries and participants in the growth of climate enterprises.

What this proves

The $52 million first close answers a question FSDAi asked in 2022: Is there demand for a well-structured, manager-development-focused early-stage climate fund in Africa?

The participation of NDF, AfDB, JICA, SEDF, and others suggests the answer is yes.

For FSDAi, the Persistent ACV Fund represents more than a single investment success. It is part of a broader effort to build the financial market infrastructure required for Africa’s climate transition.

Our portfolio includes InfraCredit Nigeria, Ci-Gaba, ATAF, the Acre Impact Fund, and ARM-Harith’s ACT Fund. These are not isolated investments. Together they strengthen the ecosystem that allows capital to flow at scale by supporting fund managers, financing structures, institutional track records and demonstration effects.

Backing Persistent before the fund existed was a bet on a team and a model. Its first close validates that bet.

The bigger question for Africa’s climate finance ecosystem is how many other teams like Persistent’s are out there, building track records without the institutional backing required to scale them.

Finding them earlier and supporting them sooner is the work we are in.

Celebrating 10 Years of Frontclear: Unlocking Liquidity and Building Resilient Markets

Posted on by Kihingu Inc

Trust is the backbone of any banking system, and liquidity is what keeps it moving.

A decade ago, across much of Africa, those two forces were not aligned. Many money markets resembled roads filled with red lights: banks were reluctant to lend to one another, liquidity remained trapped, and smaller institutions, even those holding government securities, could not access interbank credit. With legal protections unclear and confidence in short supply, central banks became the only reliable counterparties. As a result, domestic financial markets struggled to grow. Uganda ranked near the bottom of the Absa Africa Financial Markets Index, Ethiopia had no securities exchange, and Kenya’s bond trading was thin and opaque.

The idea behind Frontclear was simple yet transformative: if banks could lend with the backing of a guarantee, they could rebuild trust, unlock liquidity and strengthen market confidence. Through credit guarantees, legal reform and consistent stakeholder engagement, Frontclear helped turn those red lights green, enabling financial markets to move, build trust, and grow stronger.

A decade of impact

Since its founding, Frontclear has helped reshape Africa’s financial landscape and demonstrate how catalytic interventions can unlock systemic change.

  • £2.1 billion mobilised for African obligors
  • 117 transactions closed and 45 market infrastructure solutions developed
  • More than 90 technical assistance programmes delivered
  • Over 2,500 market participants trained through the Frontclear Academy
  • Legal and regulatory reforms in Uganda, Tanzania, Zambia and Ethiopia.

Every dollar guaranteed by Frontclear has unlocked almost nine times more in private capital, underscoring its catalytic impact.

The launch of Tradeclear in 2022 – Frontclear’s guarantee platform that helps manage counterparty credit and settlement between banks – followed by the passage of netting laws in 2023, is transforming Uganda’s interbank market. In Ethiopia, the launch of a securities exchange and a central securities depository in 2025 has created the foundation for repo trading and capital market growth.

The continuing opportunity

While Frontclear’s footprint continues to expand across the globe, significant opportunities to unlock liquidity, build trust and strengthen the resilience of financial systems remain. Africa’s local-currency bond markets have doubled in the past decade, from US$ 350 billion in 2014 to nearly US$ 700 billion by 2023. However, funding remains tight, credit is costly and interbank trading is still concentrated among a few large players.  Legal certainty for repos and derivatives is uneven, and access to long-term local-currency hedges remain limited. This leaves both borrowers and lenders exposed to foreign exchange risk and volatility.

Progress will depend on continuous collaboration. Regulators need to pass and implement robust netting laws; treasuries must support active bond markets, broaden repo-eligible collateral; regulators should champion the adoption of global master agreements, while investors and development partners should find creative structures to catalyse capital, and support technical assistance initiatives. Together, these efforts paint a picture of Africa’s financial future where interbank repos form the backbone of liquidity management, reliable reference rates are built on real market activity, and small and growing businesses benefit from the efficiencies created when banks borrow more efficiently. It is a future where domestic bond markets provide the foundation for financing sustainable growth, reducing reliance on fragile external debt.

A partnership built on catalytic capital

For FSD Africa Investments (FSDAi), Frontclear’s story is a powerful example of how catalytic capital can transform financial systems. 

In 2015, FSD Africa made an early US$ 7.5 million investment in Frontclear, anchoring its subordinated capital and absorbing initial risk. This commitment supported the launch of the Frontclear Technical Assistance Programme (FTAP) and crowded in major development finance institution partners including FMO, Proparco, SIDA, EBRD, and BMZ , who provided additioinal funding to expand warehouse financing and local-collateral repo activity. In 2019, FSDAi made a further US$ 2 million investment to help restructure Frontclear’s capital base and enable it to operate at greater scale. By combining investment with technical assistance, FSDAi demonstrated how patient, catalytic capital can be leveraged to share the early risk, prove new models, and crowd in investors to build sustainable, resilient markets.

Looking ahead: Frontlear at 10 and beyond

Frontclear’s 10-year milestone is more than an anniversary. It is a reflection of what can be achieved through partnership, persistence and innovation. As Frontclear 2.0 takes shape, its ambition is  to establish a global platform for money markets that integrates and supports emerging and frontier economies. FSDAi is proud to have been part of this journey, helping turn a bold idea into a proven model for market transformation, and look forward to the next decade of innovation, growth and impact across Africa.