49066 - SMEV Inside II

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Summary of Investment Information

Project Number

49066

Company Name

Inside Equity Fund II LP

Date SPI Disclosed

May 9, 2024

Country

Africa Region

Region

Africa

Projected Board Date

May 10, 2024

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Jul 30, 2024

Department

Equity Portfolio Management

Industry

Funds

Previous Events

Approved : Jul 17, 2017
Signed : Jul 1, 2024
Invested : Jul 26, 2024

Sector

Growth Equity Fund

Additional Project Attributes

Blended Finance

Project Description

Inside Equity Fund II (“IEF II” or the “Fund”), a Mauritius limited partnership, is targeting US$100 million to construct a portfolio of investments diversified across Eastern and Southern Africa, which collectively capture the underserved small and medium-sized enterprises (“SMEs”) in those regions. IEF II’s investment objective is to provide capital to SMEs mainly through equity instruments. The Fund will be supported by the Blended Finance Facility (“BFF”) of the IDA19 IFC-MIGA Private Sector Window (“IDA-PSW”), created by the Word Bank Group to catalyze private sector investment in IDA-PSW eligible countries (“IDA Countries”).

Associated Advisory Engagement

IFC’s advisory engagement will support the Fund across several areas, including fund management (including E&S, gender, governance, HR), and SMEs value creation and exit preparedness.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	250.0

Development Impact

The main project impact of the fund is through increased access to growth capital and value creation for SMEs. IEF II will provide access to equity capital to SMEs located in Eastern and Southern Africa such as Madagascar, Malawi, Mozambique, Mauritius, Tanzania, and Zambia. The Fund will support value creation for its investees through institutionalization and operational support to help them expand regionally. In addition, it will focus on implementing sustainability initiatives. The Fund is expected to invest at least 80% of its capital in IDA countries, and Fund’s investees are expected to be SMEs contributing to the SME Venture Program’s objectives for IDA- and SME-focused investments. Beyond the project, it is expected to support the creation and development of a nascent PE market in the region by increasing market competitiveness. The PE ecosystem in Eastern and Southern Africa is nascent, except for a few countries, such as Kenya and Mauritius. The Fund is focusing on the frontier markets in the region with negligible fundraising and investment activity. In this context, IFC’s investment and advisory to a relatively new player will be critical to supporting the Fund Manager to scale up and signal the viability of investments in these markets, inducing other funds to enter or increase investments in the target region. Moreover, it is also expected to attract new investors and help deepen the market.

IFC’s additionality is both financial and non-financial. Financial additionality includes the provision of IFC’s own equity at the Fund's first close, thereby supporting the Fund Manager to achieve its overall target fund size. Non-financial additionality comes from non-commercial risk mitigation through IFC’s participation in the first close, along with other DFIs, which will help signal confidence in the fund manager and provide comfort to other potential investors. The Fund Manager will also be supported by IFC’s advisory services, which include GP capacity building and portfolio company support, useful as the fund continues to invest in Madagascar, Mauritius and Zambia, and expands into Tanzania, Malawi and Mozambique. The Fund Manager will also be supported by standard setting to improve gender and climate practices.

E&S Category Rationale / Risks and Mitigation

This project is classified as FI-2 in accordance with IFC’s Policy on Environmental and Social Sustainability, based on the Fund’s pipeline and business strategy. The Fund is a closed-end generalist fund targeting Eastern & Southern Africa. It will focus on sectors such manufacturing, agrobusiness, healthcare, and financial services with potential additional exposure to renewable energy, waste management, consumer goods, and leisure & tourism. The activities in these sectors typically have limited adverse environmental and social risks and impacts that are few in number, site specific, largely reversible and can be readily addressed through mitigation measures.

The main E&S risks and impacts of the Project derive from the E&S risks associated with the Fund's investment activities and its E&S capacity and systems in place to manage these risks. These risks typically include labor and working conditions, occupational health and safety, waste management, and community impacts, among others. The Fund will not invest in coal and coal-related activities, Category A and Higher Risk Activities that may include: a) involuntary resettlement; b) risk of adverse impacts on indigenous peoples; c) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage; or, d) significant occupational health and safety risks. The fund will also be restricted from funding medium and high risk FIs to prevent the double intermediation risk. IFC will opt out from K-12 education projects financed by the Fund. IFC’s applicable E&S requirements for this transaction will be to comply with the IFC Exclusion List, applicable host country laws and regulations and the IFC’s Performance Standards.

In accordance with IFC's Access to Information Policy, IFC will periodically disclose the names, locations and sectors of sub-projects that have been supported by IFC investments through private equity funds, subject to regulatory constraints and market sensitivities. The sub-project(s) listed below reflect(s) the status of the portfolio as of January 1, 2025.

Investee	Country Of Investment	Sector
RDG Africa Limited	Zambia	V-EA- Distribution Business

The Fund Manager designated three investment professionals dedicating part of their time to E&S management and coordination. It has also developed and implemented a set of E&S policies and procedures generally in line with the IFC Performance Standards. These include an Integrated Investment Policy, an ESG Due Diligence template Tool as well as an E&S Management System. The Integrated Investment Policy encompasses an ESG Policy including guidelines for environmental, social, and governance considerations. The policy also includes specific details and restrictions related to the Fund's investment policies. The ESMS outlines the commitment of the Fund Manager to comply with laws and regulations, improve ESG risk and opportunity management, minimize adverse impacts and enhance positive effects on the environment and society. It also highlights the various phases of the ESG management system, including initial screening, advanced screening, investment execution, investment monitoring, and exit. The ESMS includes a risk rating matrix for environmental, social, and governance risks, categorizing projects as unacceptable, acceptable with reservations, or acceptable with minor reservations based on their potential adverse impacts. It refers to compliance with local E&S laws and regulations as well as the IFC performance standards. As part of this project, the ESMS is required to be enhanced to include E&S tools and frameworks such as E&S Due Diligence Report forms, E&S Annual reporting, and template E&S legal covenants. ESMS is also required to specify the allocation of E&S roles and responsibilities and specify the escalation process based on the E&S risk. Regarding monitoring and during the holding period, E&S reporting are informal. At Executive Committee and ESG committees, the fund manager is informed of the general operational performance including ESG and compliance. This includes monitoring progress on implementation of remedial action plans. The Fund Manager is required to (i) officially designate an E&S officer in charge of running the operations of the Fund and developing and implementing the E&S policies and procedures, (ii) develop and implement a training plan for the E&S officer and investment staff including training sessions on E&S matters and (iii) further enhance the ESMS clearly articulating an E&S policy, stating the scope and applicable requirements, developing a clear E&S monitoring process and an E&S toolbox, and including an external communication mechanism to receive and respond to E&S related queries and concerns. To support the implementation of the ESMS, IFC will review the first three E&S due diligence reports prior to the Fund’s investment. Additionally, the fund is required to disclose Category B investments on a yearly basis, including their names, sectors, and locations.

Title	Anticipated Completion Date
Nominate E&S Officer	05/31/2024
Staff E&S training	08/31/2024
Upgrade the ESMS	05/31/2024

Contacts

For Inquiries About the Project, Contact

Inside Capital Partners Ltd
Jérôme Lagesse
Managing Partner
+230 5499 0515
jlagesse@insidecapital.net
Suite 8D1, Block 8, Cascavelle Business Park, Riviere Noire Road Cascavelle 90522, Mauritius
https://insidecapital.net

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IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

For IFC projects that are active or under consideration, individual(s), or their authorized representative(s), who allege they have been or will be adversely affected by E&S risks or impacts arising from IFC's clients' business activities, may submit a complaint to IFC directly for consideration. When receiving an E&S complaint, IFC engages with complainants and works with its clients to find solutions to E&S concerns as quickly and efficiently as possible.

Complaints can be submitted to IFC online at www.ifc.org/escomplaints or by email to EScomplaints@ifc.org.

IFC complaint response is separate from and complementary to IFC’s clients’ project level grievance mechanisms and IFC’s Independent Accountability Mechanism (CAO). Lodging a complaint directly with IFC does not, at any time, restrict access to CAO.

Affected communities have unrestricted access to the Compliance Advisor Ombudsman (CAO), the independent accountability mechanism for IFC and MIGA. CAO facilitates the resolution of complaints related to IFC and MIGA projects and sub-projects, undertakes reviews of IFC’s and MIGA’s environmental and social compliance, fosters public accountability for their commitments, and enhances the environmental and social performance of IFC and MIGA.

Independent of IFC and MIGA management and reporting directly to the IFC and MIGA Boards of Executive Directors, CAO helps resolve issues raised about the environmental and social impacts of projects through a neutral, collaborative, problem-solving approach via its Dispute Resolution function. It also reviews IFC’s and MIGA’s compliance with environmental and social policies, assesses related harm, and recommends remedial actions through its Compliance function. Additionally, CAO provides advice to IFC, MIGA, and their Boards to enhance environmental and social sustainability performance and minimize the risk of harm.

Complaints may relate to environmental and social harm regarding any aspect of the planning, implementation, or impact of a project or sub-project, and can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of an IFC- or MIGA-financed business activity.

Complaints can be submitted by any of the following methods:

Online form: available at https://www.cao-ombudsman.org/
Mail/Hand Delivery to: 2121 Pennsylvania Avenue, NW, Washington, DC 20433, USA
Voice mail: +1 202 458 1973
Email: cao@worldbankgroup.org
SMS, WhatsApp, Telegram, and Signal: +1 202 650 2627

CAO receives and addresses complaints in accordance with the CAO Policy, which can be accessed at: https://www.cao-ombudsman.org/policies-guidelines.

This Summary of Investment Information (SII) is prepared by IFC to disclose a factual summary of the main elements of the potential investment. It also includes findings and recommendations related to environmental and social considerations regarding this potential investment. The purpose of the SII is to enhance the transparency of IFC’s activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this SII is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein. It is distributed in advance of IFC Board of Directors’ consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following SII is disclosed in accordance with IFC's Access to Information Policy (AIP) that went into effect on January 1, 2012.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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