Investment manager Verdant Capital and KfW Development Bank have created a new fund to support the growth of small, medium and micro enterprises (SMMEs) in Africa.
Verdant Capital Hybrid Fund (VCHF) reached its first close with a committed capital of $36 million.
The fund aims for high development impact, including job creation and income generation through small and medium enterprises and micro-entrepreneurship.
The fund will invest hybrid capital and subordinated debt securities in inclusive financial institutions on a pan-African basis.
The fund will target specialty banks, microfinance institutions, leasing and factoring companies, fintechs and other non-banking financial institutions.
Emphasis will be placed on the compliance of investments with high environmental and social standards.
The fund is targeting two more closes with a targeted final closing amount of $100 million.
The KfW Development Bank, on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ), is contributing approximately $34 million to the VCHF.
In addition to KfW, the fund benefits from capital commitments from private investors, including VCHF’s fund manager, Verdant Capital.
The raison d’être of the fund is to fill market gaps in terms of the availability of equity, equity-like or hybrid capital in the inclusive financial institutions sector in Africa.
VCHF investments can be leveraged through traditional debt financing, attracting other investors and ultimately expanding lending to SMEs.
The fund also intends to expand the use of these hybrid financial instruments in Africa and contribute to the overall development of capital markets in Africa.
The German federal government is planning an additional budget of $4.5 million for accompanying support measures.
The VCHF Technical Assistance Facility aims to help African financial institutions grow their SME lending portfolios, build organizational capacity and improve responsible finance standards, and forms an important part of the post value-added strategy. – fund investment.