This investment was made when British International Investment was named CDC Group.
Our investment
Description of the investment.
Description of the investment.
CDC/BII committed $25m as part of risk sharing agreement with Absa Bank Limited (Absa). The commitment increases Absa's capacity to offer financing solutions to Micro, Small and Medium Enterprises (MSMEs) and households across Sub-Saharan Africa through Microfinance Institutions & Non-Bank Financial Institutions (MFI & NBFIs).
This facility is the first of its kind for CDC – supporting lending to MFIs and NBFIs (through credit risk mitigation) and allowing them to better serve households and MSMEs across Africa. The facility will enable Absa to provide vital assistance to businesses and households in need of finance, helping them remain resilient and emerge from the crisis. Moreover, the investment forms part of CDC's COVID-19 response and boosts systemic liquidity at a critical time when commercial lending is limited due to the economic challenges brought on by the pandemic.
Impact information
Applies to investments made from 2019 onwards. The tabs in this section define what we expect to achieve through the investment, assessing the potential impact of the investment against six dimensions of impact. You can find more details on our methodology of assessing impact here.
Applies to investments made from 2019 onwards. The tabs in this section define what we expect to achieve through the investment, assessing the potential impact of the investment against six dimensions of impact. You can find more details on our methodology of assessing impact here.
What?
| Impact |
|---|
|
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How?
| Primary | Secondary |
|---|---|
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Economic enabler: The facility (CDC's share is 50%) will deploy credit across 7 MFI/NBFIs. MFI and NBFIs often struggle to scale due to lack of access to long-term and local currency funding matching their business needs. The risk sharing facility will enable provision of appropriate funding to the sector and act countercyclically to ensure access to financial services by MSMEs and individuals across sub-Saharan Africa. |
Catalysing markets: Commercial lending to MFI/NBFIs is currently constrained by risk perception. However the need for increasing financial inclusion is sizable. Our risk sharing facility can help Absa increase their lending to existing MFI/ NBFI clients in the short term. In the medium and long term, this could be a sufficient market signal for other commercial banks to increase lending to this segment. |
Who?
| Stakeholder | Geography | Characteristics |
|---|---|---|
| Customers |
72% South Africa (D country), 11% Botswana (C country), 10% Mozambique (B country), 3% Uganda (A country), 3% Kenya (C country), 1% Tanzania (A country), <1% Zambia (C country). The facility may be used to increase lending beyond these geographies. |
Salaried urban employees and lower income populations with little collateral or secured earnings. |
How much?
| Scale | Depth/Duration |
|---|---|
|
We can expect the facility to enable an additional c. 95,000 loans. |
Impact outomes are expected to be deeper for more underbanked populations and/or in countries characterised by lower financial inclusion. |
Contribution/additionality
| Contribution/additionality |
|---|
|
Grid score
| Grid Score
To help us direct our investments, we previously used a tool called the Development Impact Grid. It scored investments out of four, based on two factors: the difficulty of investing in a country and the propensity of the sector to generate employment. This tool was used for investments until the end of 2021. Since 2022 it has been replaced by the Impact Score. |
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2.0-3.0Market context: Commercial lending to MFI/NBFIs in SSA remains scarce. |
Risk
External RiskCovid 19 shocks are expected to put MFI/NBFIs under significant stress, in terms of access to liquidity and borrower's ability to repay, thereby putting at risk the viability of the risk sharing facility. The selection of the MFI/NBFIs should partially mitigate this risk. Alignment RiskThe impact thesis is dependent on Absa's appetite to deploy more capital to MFI/NBFIs. To mitigate the risk, Absa's MFI/ NBFI loan book utilisation and overall growth will be monitored on a regular basis. |
Reporting and Complaints Mechanism
The Reporting and Complaints Mechanism allows anyone outside BII to report alleged breaches of the business integrity or environmental and social provisions of BII’s Policy on Responsible Investing. This includes breaches made by BII, a BII investee, or a portfolio company of a fund in which BII has invested. The Reporting and Complaints Mechanism Rules are available here. Reports and complaints can be submitted by email to reportsandcomplaints@bii.co.uk or by mail. See more details on our Reporting and Complaints Mechanism here.
For any other general enquiries contact us at enquiries@bii.co.uk
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Key facts
- Last updated
:
When the last quarterly update of the website database occurred.
- June 2024
- Project number
:
An identifier number shared by investments in the same project.
- D3967
- Status
:
The current status of the investment (green flag for active and red flag for exited).
- Active
- Region
:
The geographical region where the country is located. We currently invest in Africa, South Asia, South East Asia and the Caribbean. In 2023, BII’s investment mandate was extended allowing it to invest in regional funds linked to Ukraine, with the majority of activity expected to begin post-war. Investments outside these regions were made prior to 2012 under previous investment mandates.
- Southern Africa
- Country
:
The countries where the investment delivers impact. Where impact is delivered in multiple countries, this is indicated.
- South Africa
- Sector
:
We prioritise those sectors that facilitate development and need our capital the most. Our priority sectors contribute towards many of the Sustainable Development Goals. They range from investing in the power infrastructure that will provide people with better access to electricity, to investing in financial institutions that direct capital to the individuals and businesses that need it the most.
- Financial services
- Investment type :
- Guarantee
- Start date :
- June 2021
- Amount :
- $25m
- Currency of investment :
- USD
- Domicile
:
The company or investment fund’s place of incorporation.
- South Africa
We provide capital in the following ways: directly – through direct equity, direct debt, guarantees and other non-intermediated financial instruments; and indirectly – principally through investment funds.
For direct investments and fund investments, this is the date BII committed capital to the investments. This is typically the date on which legal agreements are signed by all parties.
For the portfolio companies of our fund investments, this is the date (either the month or the quarter) on which the fund committed capital to the portfolio company.
For direct equity investments, this is the date at which British International Investment exited the investment.
For debt investments, this is the date at which the final debt repayment was made.
For funds, this is the date at which the fund was terminated.
For underlying fund investments, this is the date at which the fund manager exited the investment.
The total amount committed, per financial instrument, per investment, on the date BII becomes subject to a binding legal obligation to provide funding or assume a contingent liability. This information is provided in US dollars.
For direct investments, this is the amount that BII has committed to the business or project. For fund investments, this is the amount BII has committed to the fund.
The currency in which the investment was made.
- Last updated
Related investments made by BII into this company:
| Investment name | Commitment | Region | Sector | Start date | Status |
|---|---|---|---|---|---|
| Investment 01 | $75m | Southern Africa | Financial services | October 2019 | Active |
| Investment 02 | $100m | Southern AfricaSouthern Africa | Financial services | December 2019 | Exited |
| Investment 03 | $75m | Southern AfricaSouthern AfricaSouthern Africa | Financial services | July 2020 | Active |
| Investment 04 | $50m | Southern AfricaSouthern AfricaSouthern AfricaSouthern Africa | Financial services | August 2020 | Exited |
| Investment 06 | $150m | Southern AfricaSouthern AfricaSouthern AfricaSouthern AfricaSouthern Africa | Financial services | June 2021 | Exited |
| Investment 07 | $150m | Southern AfricaSouthern AfricaSouthern AfricaSouthern AfricaSouthern AfricaSouthern Africa | Financial services | July 2023 | Active |
| Investment 08 | $-75m | Southern AfricaSouthern AfricaSouthern AfricaSouthern AfricaSouthern AfricaSouthern AfricaSouthern Africa | Financial services | August 2023 | Active |
