35755 - Business Partners International East Africa

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Summary of Investment Information

Project Number

35755

Company Name

Business Partners International East Africa LLC

Date SPI Disclosed

Mar 16, 2015

Country

Eastern Africa Region

Region

Africa

Projected Board Date

Apr 23, 2015

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Nov 30, 2016

Department

Regional Industry - FIG Africa

Industry

Financial Markets

Previous Events

Approved : Jul 13, 2015
Signed : Oct 23, 2015
Invested : Mar 23, 2016

Sector

Other Non-Banking Financial Institution (NBFI)

Project Description

The proposed project is an IFC equity investment of US$6.0 million in Business Partners International East Africa LLC (“BPI EA” or “the Company”), a greenfield private limited liability company that will provide tailored financing to underserved SMEs in East Africa. The project represents the evolution of IFC’s relationship with Business Partners Limited (“BP” or “the Sponsor”), a South African SME investor with over 30 years of experience investing in over 70,000 SMEs.

IFC and BP have been partners in SME financing since 2004 when the two organizations set up Business Partners International (“BPI”) whose aim was to bring the successful BP SME financing business model to other Sub-Saharan African countries. Since 2004, BPI has set up four funds, including most recently the regional Southern Africa SME Fund that covers Zambia, Namibia and Malawi.

BPI EA is the evolution and scaling up of the SME financing model from a fund with a limited life and high set up costs to a more efficient and permanent vehicle that can provide the long term financing that SMEs need. The project has the unique opportunity to leverage the BP experience, processes, back-office and knowledge developed over more than 30 years of experience in high growth East African countries where SME financing is even more difficult to obtain than in South Africa.

BPI EA will invest in SMEs through its subsidiaries in Kenya and Rwanda where BPI is already active through the BPI Kenya and Rwanda SME Funds, followed by setting up a subsidiary in Uganda where BPI does not yet operate. BPI EA’s Kenya subsidiary will to take over investing activities from the BPI Kenya fund and its Rwanda subsidiary will acquire 60% of the BPI Rwanda SME Fund.

Associated Advisory Engagement

N/A

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	6.0

Development Impact

Increased access to finance for underserved segment - the Company will increase access to finance in SMEs in Kenya, Rwanda and Uganda, three IDA countries. According to the ˜Doing Business'' report, SMEs in all three list access to finance as a major impediment to doing and growing their businesses. In addition, the Company will support SMEs outside of the main economic hubs with up to 40% of investments outside of the principal economic zones in each country where access to finance is even more limited (rural access to finance).

Address market need for long term financing and partnership - Due to its structure as a perpetual investment company, BPI EA can provide longer term financing to SMEs that lack access to long term financing.

Job creation - BPI Kenya has facilitated over 9,748 jobs as at February 2014, BPI Rwanda has facilitated over 1000 jobs, and BPI Southern African fund has facilitated 382 jobs. BPI EA is expected to likewise facilitate the creation and maintenance of jobs through the SMEs financed.

Targeted financial products - BPI EA will provide tailored financing products to SMEs and entrepreneurs that match cash flows of growing businesses better than bank loans and do not put undue strain on small enterprises with limited initial cash flow for interest payments.

Support of women owned SMEs - at least 35% of investments targeted to women owned businesses and entrepreneurs. BPI investment officers have specific women entrepreneur targets tied to compensation to ensure that reach to this segment is real.

Capacity building - BPI EA will bring best in class processes and investment know-how to additional countries and through technical assistance for entrepreneurs, which will be provided as an interest free loan to the investees.

Provide long term capital to support and test a new model for scaling up long term SME financing in East Africa which has been successfully used by Business Partners in South Africa in their over 30 years of investing in SMEs. This model has allowed Business Partners to finance over 70,000 SMEs and facilitate over 560,000 jobs and once proven outside of South Africa through BPI EA, could have potential for further replicability in other East African countries and beyond.

Continue to support the regional expansion and long-term viability of a partner and investee (BPI) with a strong track record which brings best practices in SME investing in East African markets, including on environment and social standards and capacity building for the SMEs.

Improve the breadth of the East African financial sector by investing in and providing IFC''s stamp of approval of a non-bank financial institution that will provide financing alternatives for SMEs.

E&S Category Rationale / Risks and Mitigation

The project has been categorised as FI-2 according to IFC’s Environmental and Social Review Procedures. The fund’s pipeline includes exposure to business activities in sectors, such as construction, food and retail, and printing, which have potentially limited E&S risks and impacts (e.g., wastewater and water management, air emissions, solid waste, occupational health and safety). The applicable requirements are the IFC Exclusion List, and the National E&S Laws in the countries where portfolio companies are located.

The expected portfolio of BPI EA will include SMEs only. The key sectors are construction, food and retail, and printing. No more than 25% of the portfolio will be invested in any one sector.
Based on the analysis of the potential environmental and social risks associated with the expected portfolio and considering IFC’s investment, the IFC Exclusion List and national laws and regulations have been determined as the Applicable Performance requirements for this project. The expected portfolio has no Exclusion List exposure.

Contacts

For Inquiries About the Project, Contact

Mark Paper
Business Partners International : Chief Operating Officer
37 West Street Houghton Estate
Johannesburg
South Africa
Tel : +27 (0)11 713 6600
Email : mailto:mpaper@businesspartners.co.za

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