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Date: 17 January 2022

Verdant Capital DFI / MIV Survey 2021

Verdant Capital’s 2021 survey peered through the lens of DFIs / MIVs to unpack the current investment landscape within the context of the prevailing Covid-19 pandemic. The results point a positive investment outlook on the African Market.  The key insights, as packaged in the summary statements that follow, reflect on – portfolio performance, adaptations by both MIVs and MFIs to the Covid-19 environment, and the future growth of the inclusive finance/ microfinance investment industry.  

  • 84% of participants reported that their microfinance/inclusive finance investments in Africa performed either at par or above par when compared to their other global investments. A common reason used to explain the above par performance was less stringent Covid-19 lockdown restrictions and a youthful African population.
  • 56% of respondents asserted that their portfolio investments have struggled with growing NPLs during the pandemic while 16% identified each of capital raising challenges and problems of stunted loan book growth.
  • Glancing at investments reviewed and declined in 2021. The commonly mentioned reasons for rejected investments were solvency issues and / or high NPLs.  The former reason points to the pressing need for initiatives such as the Verdant Capital Hybrid Fund which achieved first close in December.
  • 58% of participants mentioned that they have increased their inclusive finance / microfinance investments in Africa in 2021 compared to 2020, while 28% have maintained the same investment amount.
  • 43% of participants went on to suggest that increases in sources of equity or hybrid capital would significantly help in the deployment of more senior debt in the market.  A broader market for currency hedging was the second most common answer, with 31%.
  • The Covid-19 pandemic has seen an increasing push by MFIs to adopt more tech-based lending and distribution channels such as mobile lending (81% of respondents) and online payments infrastructure (66%)
  • Notwithstanding the latter considerations by MFIs, 63% of respondents suggested that their investment criteria has not changed towards favouring the fintech sector over traditional financial services

The survey results reflect a market that is continuing to grow in terms of attracting investments despite the setbacks caused by the Covid-19 pandemic. Overall, current, and future portfolio investments performance look set to be competitive with the rest of the world and increases in sources of equity or hybrid capital, provision of currency hedging solutions and improvements in MFI self-reporting will only see this performance further improving.

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