The African Development Bank (AfDB) has approved a $15-million investment in multinational private-equity fund Shore Capital Fund III (ShoreCap III), which promotes financial inclusion by supporting financial institutions serving Africa’s low-income and emerging middle-class communities.
The fund, which has a target capitalisation of $150-million, will provide growth capital and capacity building for inclusive financial institutions, such as small business banks, microfinance institutions, insurance providers, leasing companies, housing finance companies and financial technology providers.
ShoreCap III will focus exclusively on sub-Saharan Africa and aims to invest in 15 financial institutions, which have an average ticket size of $8-million. The ultimate objective of the fund is to expand access to affordable and responsible financial products and services for the underserved market, as well as to institutions considering significant business and geographic expansion using innovative technologies.
ShoreCap III’s fund manager, Equator Capital Partners, has a 13-year record of investing in the financial sector, with a focus on inclusiveness. ShoreCap III is Equator’s third-generation and first Africa-focused fund. Equator will operate from its offices in Abidjan, Côte d’Ivoire; Nairobi, Kenya; and Johannesburg, South Africa.
The fund proposes an innovative model which involves, during the early stages, a capacity-building service provider – CapPlus Exchange. In addition to providing long-term finance, the model strengthens institutions’ operational performance and develops innovative small and medium-sized enterprise finance solutions to increase their effectiveness, scale and profitability.
ShoreCap III is in line with the AfDB Ten-Year Strategy (2013–2022), as it contributes directly to achieving its inclusive growth vision. It is also aligned with the AfDB’s priorities, also known as the High 5s, of pursuing the acceleration of Africa’s economic growth, as it improves the quality of life of the people of Africa by allowing for financial inclusion and more access to finance. It also integrates Africa through its support for financial institutions expending regionally and using Fintech to deliver cross-border services.
ShoreCap III further promotes the bank’s Private Sector Development Strategy (2013–2017) by developing socially responsive enterprises. The fund, by growing the number of bank branches, the loan portfolio and the customer base, is also aligned with the bank’s Financial Sector Development Policy and Strategy (2014–2019).
Ultimately, the fund is expected to generate about 3 500 new jobs, thereby also contributing to the AfDB Jobs for Youth strategy (2016–2025).