Archive for the 'Development Finance Institution (DFI)' Category

DFIs hunt long-term gains in African financial services

Highlights of the African Financial Services Investment Conference AFSIC 2016, held in London 5-6 May.

Development finance institutions have made $6.5bn of investments in financial institutions. Here are examples of what they are doing:

Proparco, Sophie le Roy, Head of Banking and Capital Markets: “We are 50% invested in Africa and financial services and banking make up 50% of our portfolio. Our aim is to catalyze private investors, we show you can invest and make profit. We have a careful process, we helped create banks in Mauritania, Benin and DRC and they still exist.”

BIO (Belgium), Carole Maman, Chief Investment Officer: “We have Eur600m under management, Africa is about 40% of portfolio, most of it is invested in financial institutions. We work on smaller transactions, our sweet spot is from EUR 6m+. We work mostly with tier 2 financial institution through microfinance, equity and loans. In countries such as Ethiopia and DRC where many people are unbanked, there will be lots of opportunities.”

FMO the Dutch development bank, Bas Rekvelt, Manager Financial Institutions Africa: “We have been investing in developing countries for 45 years, we have been able to catalyze EUR 1bn into the markets last year. We try to ensure the markets where we work are attractive enough for the private sector. Our portfolio is 25% Africa, spread between financial institutions, energy and agriculture.”

SIDA, the Swedish International Development Cooperation Agency, Christopher Onajin, Loan and Guarantees Partnerships & Innovation: “Our role is to give money and guarantees, covering credit risk and market risk. Our Africa portfolio is $135m, and we encourage banks, microfinance and others to push them to lend to under-served sectors.”

DEG – German Development and investment company, Peter Onyango, Investment Manager, Financial Institutions Group, Africa: “We have about 50 years of emerging markets expertise and Africa is a particular focus. We see more countries becoming bankable. Internally our risk appetite is improving, we see opportunities in more countries. We see opportunities in growing insurance and the nascent leasing markets, which will improve. There is a lot more in fintech. A setback for Africa is an opportune time for long-term investors, including DFIs and private investors.”

Local bond markets to fore at AfDB workshop

The African Development Bank’s African Financial Markets Initiative (AFMI) is discussing local-currency bond markets this week in Johannesburg, and over 30 countries will be there according to the press release. Key topics include how to develop domestic institutional investors, with experiences shared from across Africa, and updates on gathering data and help to include more countries in an AfDB-Bloomberg bond index.
AFMI runs a helpful financial markets database, available through their website www.africanbondmarkets.org, featuring bond and money-market news and helpful capital market descriptions for different African countries as well as a data portal.
The first day of the workshop, today 30 Nov, covers the database and the African Fundamental Bond Index as well as technical assistance. It includes how to collect accurate pricing data so that more countries can be included in the African Development Bank (AfDB/AFMI-SM) Bloomberg® African Bond Index (ABABI).
Tomorrow, 1 Dec, is open to investment banks, stockbrokers, exchanges and financial institutions. This includes presentations on the ABABI index, an African Domestic Bond Fund, and perspectives from institutional investors.

To participate in the 1 Dec African bond markets workshop please contact afmi@afdb.org as soon as possible.

AfDB launched the initiative in 2008 as part of its strategy to develop Africa’s financial sector. It contributes to developing domestic bond markets through: the African Financial Markets Database (AFMD); and the African Domestic Bond Fund (ADBF).

African Financial Markets Initiative data portal

African Financial Markets Initiative data portal

Free masterclass in funding sources for capital markets development (9-10 April)

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African capital markets could raise more donor finance and other resources to drive development projects. There are substantial technical, financial and other resources available to spur market growth, driven by the key role that African securities exchanges, private equity and other institutions can play in driving economic growth, creating jobs and channelling investment, but exchanges, governments and regulators have not been as successful in applying compared to other emerging markets.
Developing projects and raising finance is the subject for a FREE masterclass in “Funding Sources for Capital Markets Development”. This will be held on 9 April (2pm-5pm)-10 April (9am-1pm, approx) in the Museum of American Finance in New York City.
The masterclass is organized by ISEEE (International Stock Exchange Executives Emeriti, Inc. (www.capitalmarketexperts.org) and is highly recommended to African and other emerging markets securities exchanges executives, regulators such as Securities and Exchanges Commissions, and policy-makers. All stakeholders can apply.
The agenda includes overview of potential financing sources; specifics of donors and international financial institutions interested; defining project objectives and beneficiaries; case studies of exchange, securities commission and clearing house projects; and workshops in drafting funding applications.
The masterclass is presented by capital markets development expert Hannes Takacs of CAPMEX (www.capmex.com) and Dr Drasko Veselinovic, founder of the Ljubljana Stock Exchange (www.ljse.si). Drasko is a professor with a doctorate in financial economics with extensive experience in buiding and running securities exchanges and banking, as well as in privatization, non-executive board directorships and capital markets development.
I have had the pleasure of working with Hannes on several capital markets strategy projects, including in Dar es Salaam and Baku, and I can highly recommend his deep knowledge and experience, combined with a pragmatic approach. He has very extensive experience of working on securities exchanges and capital markets development projects all over the world, including Russia, China, SE Asia, and he is on the board of several stock exchanges in central Europe and does many training and other sessions.
He has a very good knowledge of securities markets developments. He pointed out that very few of the donor-funded securities market development projects are happening in Africa, despite this being a priority for many donors, compared to other regions.
According to Hannes: “The participants in this free-of-charge interactive master class will learn how to design development projects for capital market development, exchanges, clearing houses and supervisory authorities, which are eligible for funding by international finance institutions, multilateral development banks and donor agencies.”
Hannes is also ready to answer any individual questions, email him on hat@capmex.com. For more information and the brochure and application form, apply here as early as possible. Participants have to cover their own travel and accommodation expenses.

Dar es Salaam Stock Exchange chief opens trading on the London Stock Exchange

Moremi Marwa of DSE and UK Secretary of State for International Development open trading on the London Stock Exchange. Credit: London Stock Exchange

Moremi Marwa of DSE and UK Secretary of State for International Development open trading on the London Stock Exchange. Credit: London Stock Exchange

The CEO of Tanzania’s Dar es Salaam Stock Exchange (www.dse.co.tz) Moremi Marwa opened trading on the London Stock Exchange (www.lseg.com) on Monday (27 Jan) alongside the UK Secretary of State for International Development, the Rt Hon. Justine Greening MP. The London Stock Exchange Group also signed a Memorandum of Understanding with Britain’s Department for International Development (DFID) to work on capital markets development projects across Africa south of the Sahara, using the expertise of the London Stock Exchange Group Academy.

According to a press release from LSE: “LSEG Academy will work with up to 50 Tanzanian market operators, regulators and professionals with the aim of helping to fast track the development of a long term, sustainable equity capital market.” The opening ceremony event was hosted by Alexander Justham, CEO of London Stock Exchange plc, and launches a year-long training and professional development programme.

LSEG and DFID are to work together to help build the pool of skilled professionals in government and the private sector required to continue growing capital markets in sub-Saharan Africa. These initiatives will be facilitated in co-ordination with DFID’s country programmes and financial-sector relationships.

LSEG Academy has good track record in delivering bespoke training programmes for emerging and frontier-market institutions and participants, including the regulator of the Angolan capital market, the Kuwait Stock Exchange, the Mongolian Stock Exchange, the Saudi Capital Markets Authority and Romanian capital markets institutions. LSEG’s technology division, MillenniumIT, has worked with 13 African exchanges and infrastructure providers.

LSE’s Justham said: “This is an exciting day and we are delighted to welcome so many of the leading figures from Tanzania’s capital markets. Both London Stock Exchange and DFID understand the importance of economic growth in improving people’s lives. By combining our expertise and experience in this innovative partnership, we hope to enhance capital markets across sub-Saharan Africa, so that they in turn can help companies to grow and create vital jobs.”

London Stock Exchange traces its history back to 1801 but now operates international equity, bond and derivatives markets, including London Stock Exchange; Borsa Italiana; MTS, Europe’s leading fixed-income market; and the pan-European multilateral trading facility (MTF) Turquoise. It offers “unrivalled access to Europe’s capital markets”. It also operates post-trade and risk management services including CC&G, a central counterparty clearing house (CCP) headquartered in Rome, and Monte Titoli, the significant European settlement business, and it is majority owner of LCH.Clearnet, a leading multi-asset global CCP.

The LSE offers real-time and reference data products, including: Sedol, UnaVista, Proquote and RNS, as well as access to over 200,000 international equity, bond and alternative asset class indices, through LSEG’s world-leading index provider, FTSE. It is a leading developer of high-performance trading platforms and capital markets software. The LSE Group MillenniumIT technology for trading, surveillance and post-trade technology is used in the group’s own markets and over 30 other organisations and exchanges around the world.

The LSE Group is headquartered in London and has operations in Italy, France, North America and Sri Lanka. It employs some 2,800 people.

Calvert Foundation says all investors set to include impact investments in portfolios

A major shift is coming in which all investors, individual and institutional, will commit at least a portion of their investable assets to social impact and investing in harmony with their values. Lisa Hall, President and CEO of Calvert Foundation (www.calvertfoundation.org), recently wrote in a blog post: “In 20 years we will look back and consider these past few years as the turning point in an economic movement”. She says she is seeing “a change in cultural norms and expectations”.
Investing for a return that is both financial and social, in other words impact investing, has gained popularity in the last few years, since about 8 years ago when it was still dubbed “community investing.” This remains a core part of socially responsible or sustainable investing, investing into organizations which help people to improve their lives through affordable housing, jobs, community services such as daycare and healthcare, and more, not into publicly-traded companies.
For example, Calvert Foundation offers impact investments so everyone from individual investors in increments of $20 to large corporations in as much as $20 million can invest in low-income communities and provide capital where there is none. The Community Investment Note (CI Note) pays a return of up to 2% to investors and directs capital to help finance affordable housing, charter schools, health centres, Fair Trade coffee co-ops, and job creation. She says: “These investments in the future of our country and our world are helping to transform the lives of individuals and families.”
The mood is changing in how investors think about risk, return and rewards. Calvert Foundation recently commissioned a study involving 1,065 financial advisors: 72% said they had interest in offering products that provide sustainable investment to their clients, while 38% expressed strong interest in being able to offer those products now. The advisers surveyed indicated that they were willing to recommend impact investments to one-third of their clients, dedicating 10%-20% of their portfolios to this type of investing. Based on these numbers, the study estimates a sustainable investment market of about 2.5% of advisers’ assets under management, or $650 billion. “The change that these dollars can make is both monumental and within the scope of our imagination, our expectations and our ability.”
Calvert works with financial advisors and multiple brokerage firms so investors can include the CI Note in their investment portfolios. Microplace (www.microplace.com), an eBay company started in 2007, helps investors purchase Notes online from as little as $20. Hall says: “We are also developing strategies to bring new investors into the fold. For example, we want to engage the millennial generation through partnerships with colleges and universities, social media outlets and networking events. We are also embarking on efforts to connect diaspora communities and enable individuals to invest in their countries of origin. Other special initiatives that we envision for the future include regional initiatives.”

Business – Starbucks backs jobs
The business community is also getting more interested and large corporations are beginning to understand the power of uniting investment and social conscience. Starbucks Foundation in US has teamed up with the Opportunity Finance Network (OFN) to help create and sustain jobs with a $5m seed investment into Create Jobs for USA programme provides capital grants to select Community Development Financial Institutions (CDFIs), including Calvert Foundation, which provide loans to under-served community businesses. The goal of Create Jobs for USA is to bring people and communities together to create and sustain jobs throughout America.

“Food to my soul”
An investor may see impact investing as just a part of the portfolio until she or he understands the social impact. Marta Santiago, a New Mexico resident and CI Note holder since 2005 said: “Calvert Foundation offered me a great opportunity to give food to my soul when it came to switching from Wall Street to an organization that is entirely devoted to helping the community, especially the needy, in a varied, fruitful, and meaningful manner.”
As US government grants for non-profits gets shut down, they turn to impact investors so they have funds to continue providing critical services. The Nonprofits Assistance Fund (NAF), a Calvert Foundation borrower, stepped in to offer emergency bridge loans, providing credit to cover cash flow delays for groups such as the Northern Lights Community School of Warba, Minnesota, a well-managed and incredibly successful school catering to students who have faced difficulties in traditional public school settings. Since 1980, NAF has provided over $75m in loans to more than 1,700 non-profits.
Calvert Foundation’s partner The Paradigm Project, also accessible to investors through our CI Note, invests in clean-burning stoves that reduce wood consumption and toxic smoke, saving village women in northern Kenya long and often treacherous journeys to collect wood. Although the stove is a solution to just one problem, it is part of restoring dignity to women for whom mercy has been in short supply.
Hall is President and CEO of Calvert Foundation. She has more than doubled the portfolio she managed from $76m to $190m while keeping losses under 1.2% during one of the most economically challenging periods in recent history. Follow Lisa on Twitter @LisaGreenHall

IFC to issue $50m (NGN8 billion) Naija bond in Nigeria

The International Finance Corporation (www.ifc.org), part of the World Bank group, plans to issue a $50 million (NGN 8 billion) local-currency Naija bond in Nigeria to support the domestic capital markets and increase access to local-currency finance. IFC bonds are rated triple-A by Moody’s Investors Service and Standard & Poor’s and the Naija bond is likely to appeal investors such as pension funds, insurers, asset managers, and banks wanting to diversify their portfolio while investing in high-quality assets.
It is part of an extensive programme by the IFC to issue more local currency bonds in a range of countries. IFC launched its Pan-African Domestic Medium-Term Note Programme in May 2012. It focuses on Botswana, Ghana, Kenya, Namibia, Rwanda, South Africa, Uganda and Zambia. IFC has obtained approvals to issue local-currency bonds in Kenya.
According to Solomon Adegbie-Quaynor, IFC Country Manager for Nigeria, quoted in this IFC press release: “The IFC Naija bond will support the Government’s efforts to deepen domestic capital markets in Nigeria. It will help pave the way for other issuers in the domestic markets and makes available funds that can be put to work in the local economy.”
Jingdong Hua, IFC Vice President and Treasurer, added: “Vibrant domestic capital markets are the foundation for lasting growth—and in Africa, they can mobilize capital to close the financing gap for key sectors such as infrastructure and housing. The IFC Naija bond will be a milestone achievement as we continue to work with governments and local authorities to strengthen domestic capital markets in the region.”
Local currency proceeds from the African bond will be used to support IFC’s development programme for the private sector. IFC’s committed portfolio in Nigeria stands at $1.1bn, the largest country portfolio in Africa and the eighth-largest globally. It will be the IFC’s first naira-denominated bond and the first bond placed by a non-resident issuer in Nigeria’s capital markets.
IFC issues bonds as part of its regular programme of raising funds for private-sector development, and to support the development of domestic capital markets. In many cases IFC is the first, or among the first, non-resident issuers. Last 30 June (2012), IFC had outstanding bonds totalling $45bn in 11 currencies. Before the current programme, IFC worked with Ghana, Zambia, and 8 members of the West African Monetary Union to establish local-currency bond programmes, including bonds in CFA francs during 2006 and 2009.
The IFC Naija bond is the result of collaboration with the Nigerian Government, regulatory authorities, and market participants. Chapel Hill Advisory Partners Limited and Standard Chartered are lead managers of the transaction.
IFC is the largest global development institution focused exclusively on the private sector, financing investment, mobilizing capital and giving advice to businesses and governments. Investments reached an all-time high of more than $20bn in the 2012 financial year.

Botswana’s rise as world diamond centre – Stanchart “money laundering” woes slow P1.8bn OPIC financing

A large centre of the world’s diamond trade is moving to Botswana, the world’s top diamond producer. De Beers’ Diamond Trading Corporation (DTC) has successfully moved from London to Gaborone in August and De Beers estimates that some 32 million carats of diamonds worth US$6 billion – about 40% of world diamond sales – will be aggregated in Botswana each year. The “sights” by which De Beers sells packets of diamonds to selected buyers ten times a year, will also move to Gaborone from London.
The US Overseas Private Investment Corporation (www.opic.gov) has been trying to join the action, with a BWP1.8bn ($234m) deal to finance the 21 diamond manufacturing companies operating in Botswana, according to this report on Mmegi Online. OPIC is aiming to work with US diamond and jewellery company Lazare Kaplan Botswana. Finalization has slowed since relations between Standard Chartered bank and the US after allegations of money-laundering schemes worth $250m of Iranian funds. The deal was initially set up with ABN Amro bank, which established a Gaborone office as part of the first deal, but the stakeholders reportedly fell out.
The diamond trade switch will have a huge effect on the fast-growing Botswana economy and comes after tough negotiations between De Beers and the Botswana Government. Production from all of De Beers mines across Namibia, Botswana, Canada ‎and South Africa will be sent to Gaborone and mixed and sorted into various ‎categories before the “sightboxes” are sent to London for distribution to 66 London and two Canadian sightholders. Boxes will go to Johannesburg for 10 South African sightholders and to Windhoek for 13 DTC Namibia sightholders.
The first of 85 diamond sorters, who mix the sightboxes, have already gone to Gaborone. De Beers said the move of the aggregation operation, after nearly 80 years in London, was two months ahead of schedule, although three years since the initial deadline passed after tough and prolonged negotiations with ‎the Government of Botswana before a 10-year supply agreement was agreed in 2011.
By the ‎end of 2013, the 10 “London sights” a year will move to Gaborone and sightholders will travel. De Beers says US$22m will be invested to get DTCB Building ready for the first sight. Banks which lend to sightholders, such as ABN Amro, Bank of India and another Indian bank, are setting up and Stanchart is expanding its diamond financing division. A division of jeweller Tiffany & Co. already has cutting and polishing operations in Gaborone.

Diamond trading shift to make Botswana economy sparkle
© Sergydv | Stock Free Images & Dreamstime Stock Photos

The Botswana Government has set up Okavango Diamond Company (ODC) and this will also start selling diamonds in 2013, with the right to buy 12% allocated supply from Debswana in 2013, rising to 15% by 2016. Debswana produced 22.9m carats in 2011, so ODC would get 2.7m – 3.4m carats (US$300m – US$583m a year) to sell, rising as Debswana production climbs. It is be first time full revenue on some Debswana production will be channelled entirely to the Botswana Government and not shared with De Beers. Industry expert Martin Rapaport says ODC will be among the world’s top 6 or 7 diamond suppliers and will be able to brand “Botswana diamonds”, attracting a stream of tourists and buyers. It recently appointed diamond veteran Tony Frears as Managing Director. The sales will also provide the Government with market intelligence. ODC may eventually start trading polished diamonds. Firestone Diamonds and Lucara Diamonds have also sold rough diamonds.
OPIC’s financing is to help diamond-manufacturing companies in Botswana to finance purchase of rough for processing and help a financial sector support development of the cutting and polishing sector. According to Mmegi, there are 21 Botswana sightholders and the amount allocated will rise from the current $550m to $800m.
Philippe Mellier, De Beers chief executive, said: ‎‎“As De Beers shifts more and more of its sales operations to Botswana over the next ‎year, we will solidify the long-term future of the partnership and work to transform ‎Botswana into one of the world’s leading diamond trading and manufacturing hubs.” He added that it should not affect South Africa and Namibia’s activities “There is no risk. In fact, we believe there will be an overflow effect on South Africa’s industry and in Namibia as well.”

Ready, steady Ngozi – for World Bank president

My favourite read, the Economist gives a rounding editorial here on why the world should back Ngozi Okonjo-Iweala for next President of the World Bank (www.worldbank.org). “May the best woman win!”