APIS GROWTH FUND I


Overview

  • Reference: P-Z1-HZ0-031
  • Approval date: 13/12/1901
  • Start date: 01/01/2002
  • Appraisal Date: 20/08/2016
  • Status: ApprovedAPVD
  • Implementing Agency: --
  • Location: Nigeria, Kenya, South Africa

Rationale

i)The Fund is fully in line with the Bank's strategy of supporting catalytic transactions to enable other potential investors to participate in the Fund. Second, it is aligned with pillar I and II of the Bank's Financial Sector Development Policy and Strategy (2014-2019) or FSDPS, which seeks to increase access to finance to underserved sectors and deepening financial markets. By investing in companies that provide services in payments, savings and investments, credit, insurance and capital markets, the Fund will be increasing access to the underserved segments of beneficiary countries. Third, the Fund is in line with the Bank's Long Term Strategy (2013-2022), which aims at developing a sound private sector through the development of entrepreneurship in the financial service industry. Finally, it aligns with the Bank's policy and strategy on Regional Economic Cooperation, which advocates the transfer of resources for regional oriented investments.

ii)The Bank's High Five (H5) Agenda: The Fund meets 3 of the Bank's H5 agendas, which are:

(i) Industrialize Africa;

(ii) Integrate Africa; and

(ii) Improve the quality of life for the people of Africa. First, by supporting private companies in the financial service industry, the Fund will be contributing to industrialization of Africa. The financial service based companies, supported by the Fund, will increase the quality and quantity of their respective services, thereby enhancing the industrialization of Africa. Second, one of the financial services solutions is to increase the payment systems integration and connectivity, which is in line with Integrate Africa agenda. Besides, the Fund is a multinational project that meets the Integrate Africa agenda. Third, supporting financial services will enable and accelerate access to finance by various entrepreneurs, which would in term create jobs, thereby improving the quality of life for the people of Africa.


Benefits

i) Financial Inclusion: Financial inclusion will be the main development outcome from the Fund investments. Although not all investments may address financial inclusion directly, as a whole the Fund, by its very nature, is highly focused on having a positive social impact in fostering and enabling financial inclusion. In fact, of Apis' 30 investment opportunities in the pipeline, 25 of them (83%) directly address financial inclusion. The Fund is coming at a time when there is an expanding demand for financial services and the 'catch-up effect' as a result of the existing low penetration in terms of usage. The expected increased demand is driven by the improving macroeconomic conditions in terms of GDP and incomes. New and innovative business models are enabling greater access to financial services to widely dispersed low income but large populations, which is driving financial inclusion. The Fund will invest in companies that present innovative business models adapted to local constraints and that will reach out to a large portion of the unbanked, thus catering to their financial needs. The provision of these services in a profitable and sustainable manner will pave the way for further inclusion.

ii) Private Sector Development: The Fund will be promoting private sector development in RMCs, by investing up to USD 300 million (60% in Afroca) in private companies (about 8-12 investee companies) in the financial service industry. The absence of traditional legacy financial infrastructure in Africa presents an environment ripe for innovative business models and alternative distribution channels in financial services. Private investors are benefiting from several examples of innovative financial services, ranging from mobile banking to remittances and agent banking, or micro financing and micro-insurance. The Fund's enhanced portfolio companies will be in better position to capitalise on the unbanked opportunity by delivering financial services in a tailored way. In general, the Fund will:

(i) enhance private ownership and strong local entrepreneurship;

(ii) promote and develop technology based financial services;

(iii) introduce new technology and know-how, develop or upgrade technical and management skills, and train employees; and

(iv) contribute to domestic capital market development.

iii) General Development Impact: The direct impact includes the creation of robust employment (TBD), an increase in fiscal tax receipts by governments (TBD), and development of further capital, which ultimately fosters economic growth and wealth distribution in these regions. Supporting growth in financial services by investing in financial infrastructure is a precondition for growth and necessity for wealth creation on an individual level and wealth distribution on a societal level. Financial inclusion entails bringing more people into the formal financial system and can lead to an increase in economic growth and stability in RMCs.

Analysis of Additionality and Complementarity:

(iv)Financial Additionality: The Bank participation as an early investor in the Fund's first closing is important in the sense that it will demonstrate to other investors that a strong African institution supports the fund. AfDB's early commitment is expected to provide comfort, and play a catalytic role in mobilizing DFIs and non-DFIs commitments in both the first and second closing.

v)Non-financial Additionality: The Bank will leverage its advisory role to more closely align the investments with the Bank's High Five agenda and Long-Term Strategy and help Fund Manager monitor and improve corporate governance practices of investee companies, including environment and social effects. Thus, the Bank will contribute to improve the success of the Fund through its active role in the Limited Partners Advisory Committee and the annual supervision.

vi)Complementarity: The Bank's participation in the Fund will complement its current efforts on financial inclusion, financial sector and consumer service development. The Fund provides a good vehicle to the Bank in terms of building up local financial service entrepreneurs, which the Bank could not finance directly by itself due to the small size investments. In addition to this, the Bank's participation in the Fund will assist in consolidating its relationships with other institutional funders that are participating in the Fund, including EIB, CDC, OPIC and FMO.


Key contacts

KYOKUNDA Grace - PIFD1


Costs

Finance source Amount
ADBUSD 14,368,435
DeltaUSD 35
TotalUSD 14,368,400