The European Investment Bank (EIB) is extending a EUR 2 million (almost USD 2.7 million) grant to support the AfriCap Microfinance Investment Company through FinTech Africa to fund capacity building for early-stage and Greenfield microfinance institutions across Africa. The EIB grant will be complemented by a USD 5 million grant from the Bill & Melinda Gates Foundation to FinTech Africa, the not-for-profit organisation that manages the technical services facility and a further USD 0.75 million grant from the Dutch Development Agency, FMO.
The combined technical assistance funding will encourage the development of young microfinance institutions which are in need of grant finance to train staff, develop their financing strategy and ensure efficient and correct management. This, in turn, will have a positive impact on access to finance and poverty reduction in Africa, delivering less expensive and more widely available financial services to under-banked, low-income clients.
Plutarchos Sakellaris, EIB Vice President responsible for lending activity in Africa, underlined the Bank’s commitment to the development of the microfinance industry. “The EIB’s main lending objectives in the ACP regions are to reduce poverty and encourage economic growth, in line with the Millennium Development Goals. The Bank recognises that microfinance is a cornerstone activity for achieving these objectives. We have worked with AfriCap in the past and are confident that they have the required structure and management to ensure that the technical assistance grants reach those microfinance organisations that can most benefit from them. Moreover, the EIB is delighted to work alongside organisations such as the Gates Foundation and FMO for the common goal of helping less favoured communities to develop economically and improve their quality of life.”
AfriCap Microfinance Investment Company is an experienced fund manager and is incorporated in Mauritius where the comprehensive regulatory framework favours private sector development. FinTech Africa is a not-for-profit organisation created to manage the technical assistance, also registered in Mauritius. Fintech Africa and AfriCap are both managed by Mecene Investment South Africa Ltd a Private Equity Fund Management company specialized in socially responsible investments in Africa. In the past, AfriCap investees benefited from similar technical assistance funded by grants from development financiers. FinTech’s work builds on those experiences and the acquired expertise.
The funding from the three donors will be used for separate areas of technical assistance activity. The USD 3 million from the EIB will be used for targeted capacity building, specifically risk management, product and strategy development and effective use of technology. The funds from the Bill & Melinda Gates Foundation (USD 5 million) will contribute to strategic and technical support through investee capacity building and innovation grants, whilst the USD 0.75 million from FMO will be dedicated to knowledge-sharing and network activities.
The EIB has past experience of working with AfriCap, twice having provided equity participation in AfriCap funds. In 2001 the EIB participated in AfriCap’s first Fund with EUR 2 million in equity. The Bank is also involved in the current fund – AfriCap II – for which it agreed a EUR 5 million equity participation in October 2007.
EIB Microfinance Activities in the ACPs
The European Investment Bank (EIB) is active in Africa, the Caribbean and the Pacific (ACP) under the Cotonou partnership agreement. EIB loans and investments in these regions aim to reduce and eventually eradicate poverty and encourage sustainable social and economic development.
Microfinance is an important foundation for poverty alleviation and supports other development efforts, including the Millennium Development Goals. The EIB’s microfinance activities are an important element of its financing operations in the ACPs, providing access to financial services which is fundamental to protecting and empowering the poor.
EIB commitments for microfinance projects in ACP countries stand at EUR 90 million in debt and equity. The Caribbean region has been the largest microfinance beneficiary to date, accounting for EUR 54 million or almost 60% of total microfinance commitments in ACP countries. Since 2005, however, the geographical focus of EIB microfinance operations has shifted to Africa where the EIB has participated in 8 microfinance operations to the value of EUR 27 million.