July 17, 2007
Helping Close the Capital Gap in Africa: Two Big Investments in African Microfinance
by Anne Moore Odell
More than half of all South Africans still have no access to banking reports Shared Interest, a
non-profit investment fund that guarantees bank loans for South Africa's poorest communities. Many
Africans suffer from lack of available capital, where only 7 million of Africa's estimated 940
million people had access to microcredit in 2005, according to the State of Microcredit Summit
Campaign Report 2006.
With its many sparely populated
rural countries, lack of basic services, and extreme poverty, working in many of Africa's countries
is challenging for microfinance institutions (MFIs) and for the investors who support their
Two recent investments by US-based organizations in South Africa and Ghana
businesses that help people from impoverished communities gain access to capital will help
thousands of people create small businesses, gain access to housing, and create cooperatives to
help close the capital gap.
The United Methodist General Board of Pension and Health
Benefits (UMC-GBPHB) has invested $1 million in New York-based Shared Interest, which will work
with its South Africa partner the Thembani International Guarantee Fund to guarantee bank loans in
communities overlooked by mainstream banks. MicroVest and the Calvert Foundation this month also
announced a $1.5 million debt investment in the Sinapi Aba Trust (SAT), a MFI based in Kumasi,
The UMC investment is Shared Interest's largest single investment to date.
Currently Shared Interest has $11.4 million in assets invested with Thembani. This investment also
marks one of the first US pension fund investments supporting African communities.
UMC-GBOPHB investment will enable Shared Interest to provide access to credit and technical
assistance for an additional 30,000 low-income South Africans of color by enabling them to launch
small and micro-enterprises," said Donna Katzin, Executive Director of Shared Interest. "This will
bring Shared Interest's total of beneficiaries assisted to date to more than 1 million people."
The United Methodist Church is expanding rapidly on the African continent. The UMC-GBOPHB
decided to invest with Shared Interest, in part, to develop a retirement program for African
clergy. "The decision to invest in microfinance in Africa was driven by our desire to invest funds
that will ultimately support African clergy in a manner that will positively impact others in
Africa" said David Zellner, Chief Investment Officer for UMC-GBOPHB.
In 1996, Shared
Interest helped to launch the Thembani International Guarantee Fund. Shared Interest raises
investments in the US to capitalize a pool of funds that is used to back guarantees on Thembani's
behalf. These guarantees are backed by letters of credit, drawn on Shared Interest's bank in the
US, and issued to South African banks to cover part of their loans to South African community
development financial institutions (CDFIs) that serve the country's lowest income communities.
"Our primary goal is to attain an appropriate rate of return for the investment given our
assessment of risk," explained Zellner. "An important element of the mission of our organization is
to provide participants with a secure benefits program. We do so by investing assets in a socially
Shared Interest estimates that the $1 million investment will
leverage at least $6 million in loans distributed through South African CDFIs and will reach 30,000
"Shared Interest's impact in South Africa has increased exponentially in
recent months, as demand for our guarantees has increased," Katzin told SocialFunds.com. "During
the past 12 months, we have benefited more low-income South Africans of color than during the
previous 12 years - bringing our total number of beneficiaries to 975,000 people - 75% of them
women. Soon we will reach one million."
MicroVest and the Calvert Foundation are working
directly with Sanapi Aba Trust (SAT), in Kumasi, Ghana, with a combined $1.5 million two-year loan.
Headquartered in Bethesda, MD, MicroVest, the first private microfinance investment fund in the US
with over $64 million in assets, is investing $1 million in SAT. The non-profit Calvert Foundation
that works to help investors with community investment is lending $500,000 to SAT.
"Barring two large MFIs, Ghanaian MFIs have not been able to access significant capital from
international sources and local funds availability is limited," said Sasidhar Thumuluri, Investment
Associate for MicroVest Capital Management. "These MFIs are constrained in terms of business growth
due to capital deficit. The MicroVest and Calvert Foundation debt opens doors for such MFIs to
access capital from commercial funds at competitive rates and in turn helps them reach large number
of economically active poor."
SAT, established in 1994, currently has over 50,000
clients, with 18 branches all over Ghana. SAT's mission is "serving as a mustard seed through which
opportunity for enterprise development and income generation are provided to the economically
disadvantaged to transform their lives".
MicroVest contacted SAT last year as a part of
business prospecting, as MicroVest was interested in entering Sub-Saharan Africa for some time.
This is MicroVest's first investment with microfinance in Africa.
SAT reports that in
Ghana about 40% of the population lives below the poverty line. "SAT, an institution committed to
transforming the lives of the poor, is faced with the challenge of scaling up its operations to
serve more disadvantaged entrepreneurs," said Joyce Owusu-Dabo, Programmes Marketing Manager for
"It is with this background that SAT seized the opportunity to tie a business
relations knot with MicroVest and Calvert Foundation, both in the USA where convertible debt equity
of US$1,500,000 was realised to SAT in June, 2007, to support its operations, " Owusu-Dabo told
Partnerships between American investors, both institutional and
individual, and African MFIs continue to grow, but still lag behind their counterparts in Asia and
"I would say microfinance in Africa is at least 5 years behind schedule
compared to South Asia or Latin America," MicroVest's Thumuluri said. "But the growth has been
phenomenal in recent past. Poor infrastructure, weak institutions, lack of financial and human
capital, are in my opinion biggest bottlenecks. However, recent positive changes such as
establishment of democratic institutions, reverse migration of qualified professionals, and
improving governance in countries like Ghana are attracting greater investor interests," Thumuluri
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