Verdant Capital Hybrid Fund is investing hybrid capital instruments into inclusive financial institutions on a pan-African basis. The fund is targeting a commercial return, and a developmental impact by supporting financial institutions which in turn support SMEs and micro-entrepreneurs, thereby creating jobs and livelihoods. The fund has committed capital of USD 36 million following its first closing in December 2021 and is targeting USD 100 million by its final closing before the end of 2024. While the fund is denominated in US Dollars it has the flexibility to invest in most local currencies and in Euros.
Verdant Capital Hybrid Fund is targeting specialist banks, microfinance institutions, leasing companies, factoring companies, fintech and other non-bank financial institutions. A strong focus will be to ensure that the investments comply with high environmental and social standards. The fund has the flexibility to invest in a full range of hybrid instruments, including preference shares, holding company debt and subordinated debt. For deposit-taking institutions, the fund is investing instruments that qualify for Additional Tier 1 or Tier 2 capital treatment. Hybrid capital provides an effective intermediate capital tier that can be leveraged by local and international senior debt investors thereby “crowding in” other sources of capital. The fund is investing in North Africa, West Africa, East African and Southern Africa including South Africa and across both Anglophone, Francophone and Lusophone countries. The fund is accompanied by a USD 4.5 million technical assistance facility which will support the strengthening of operational and organisational capacity at investee institutions and forms an important part of the fund’s post-investment value add strategy. The anchor investor is KfW Development Bank.
