Washington, D.C., Stockholm, Johannesburg, Port Louis, October 25, 2007– AfriCap Microfinance Fund, the first African Microfinance Private Equity Fund dedicated to the Microfinance Industry announced today the closing of 2ndround of investments that raises the capital of the company to $50 million. In addition to the increase in capital, the company transformed into a permanent capital investment company and changed its name to AfriCap Microfinance Investment Company.
AfriCap is today one of the most successful private equity funds in Africa. Over the past six years the company has established a solid track record; it has invested in 12 Microfinance Institutions across Africa, generated two exits with an average IRR in excess of 30% and participated in the listing of Equity Bank Limited, the first IPO of a Microfinance Institution in Africa. Managed by a team of African professionals based in Johannesburg, the Fund has earned a reputation as a value enhancer with a hands-on approach to management of portfolio companies.
AfriCap’s recapitalization received strong investor support especially among its early shareholders such as Calmeadow, AfriCap Sweden, Accion, the European Investment Bank and FMO. Indeed existing shareholders subscribed to ~35% of the new capital. The recapitalization attracted additional development organizations such as FinFund, NorFund and SwedFund but notably private investors such as Nordic MicroCap, Blue Orchard Private Equity and the Gray Ghost Fund.
The high level of interest in the share issue is a testimony to the success of AfriCap, a confirmation of the credibility of Africa as a Private Equity Investment destination and a reinforcement of attractiveness of the microfinance industry in Africa.
“We have been pleasantly surprise by the response that our recapitalization has received from the investor community. The high level of investor interest is in itself a significant accomplishment for an African Microfinance Fund,” said Anne Marie Chidzero, Chair of the Investment Company.
Integral to the transaction is the exit of some early shareholders of the Fund such as “Société Belge Pour Le Développement International (BIO)”, DOEN Foundation, CORDAID and Argidius Foundation, through the sale of their stake to existing shareholders. The exit generated for the shareholders an IRR in excess of 14% (compared to a hurdle rate of 6%). The exit of investors and the entry of new shareholders after only six years demonstrates the level of interest in the Fund and the existence of a liquid market for its shares.
“As a sponsor and founding shareholder of AfriCap we have seen the Fund develop into a major player in the Microfinance Industry in Africa. In its first 6 years of existence, the Fund has demonstrated the financial and social return potential of Microfinance. We are pleased to continue to be part of the development of the Investment Company,” said Alex Silva, Executive Director of Calmeadow, and Board Director of AfriCap.
With the completion of this round, AfriCap is by far the largest African Private Equity Fund dedicated to the Microfinance Industry in Africa. The company’s mandate remains demonstrating the attractiveness of private investment in microfinance by achieving commercial returns and building a portfolio of industry leaders that will set the standards of excellence in Africa. The Company will continue to invest in local, entrepreneurial microfinance institutions in Africa such as Equity Bank, Kenya. However, drawing from its experience during the first five years of its existence, the company plans to expand the scope of investment into a wider range of financial services that improve the lives of micro-entrepreneurs and low-income households. The company is expanding its area of intervention to include micro-insurance, low-income housing, micro-leasing and money transfers.
“My team is eager to implement our aggressive investment program, build up our portfolio across the continent and in due course seek access to the capital markets in Africa or Western Europe”, said Wagane Diouf Managing Director of AfriCap Investment, the South African Fund Management Company advising the Investment Company.
AfriCap is a $50 million African Microfinance Investment Company established in Mauritius. AfriCap Investment, a South African advisory company in Johannesburg manages the Investment Company.
Founded in 2001 by Development Finance Institution and Microfinance Social Investors, the Fund provides equity capital and technical assistance to leading African MFIs.
In October 2007, the Fund transformed into a Investment Company and raised its capital from $14 million to $50 million.
Following the capital increase, the following institutions are shareholders of the new company:Accion International, AfriCap Sweden, Calmeadow, Calvert, European Investment Bank, FMO, Hivos-Triodos, IFC, Nordic Microcap, Gray Ghost Investment Fund, NorFund, SwedFund, FinFund and Blue Orchard Private Equity Fund.
Operating similarly to the venture capital model, AfriCap offers an integrated investment package. The Company invests in the form of equity and quasi-equity instruments while also providing management advice, governance and technical assistance. The adjoined Technical Services Facility (TSF) grant fund provides the financial means for building capacity within portfolio companies and for creating an enabling environment for broader access to financial services.
The Company’s Investment Strategy is to invest, over five years, in 15 to 20 leading microfinance service providers across Africa. These investments will not only be attractive on their own merits, but will also support a broader objective, that of attracting additional capital from African and global markets into the emerging microfinance industry. AfriCap invests exclusively in institutions dedicated to microfinance (now including micro-insurance, micro-leasing, low-income housing and money transfer), and as such brings a specialist expertise and focus to the management of each investment and to the development of the portfolio as a whole.
To date AfriCap has invested in the following institutions: CAP Microfinance (Senegal), Opportunity International Bank Malawi (Malawi), Equity Bank (Kenya), Quality Finance International (Egypt), Socremo Banco de Microfinanças (Mozambique), Susu Microfinance Bank (Nigeria), Union Trust Bank (Sierra Leone), Women’s World Banking (Ghana), Wizzit Bank ( South Africa), Ferlo (Senegal) and Access Bank (Madagascar).