Largest African microfinance company created

| Friday November 9, 2007 00:00

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 now 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 Internal Rate of Return (IRR) in excess of 30 percent 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 recapitalisation received strong investor support, especially among its early shareholders such as Calmeadow, AfriCap Sweden, Accion, the European Investment Bank and FMO. Existing shareholders subscribed to 35 percent of the new capital.

The recapitalisation attracted additional development organisations 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 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 surprised by the response that our recapitalisation 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, through the sale of their stake, to existing shareholders. The exit generated for the shareholders an IRR in excess of 14 percent (compared to a hurdle rate of 6 percent). 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 six 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. 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. (Africainvestors)