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TRANSCRIPT
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Addressing the Challenges to Investing in Conservation
SMEs in Africa
ABCG Meeting March 22nd 2005
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Verde Ventures Approach
Corridors
Economic Incentives
Small Businesses as Conservation Partners
Chronic Lack of Capital
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Verde Ventures Overview
$6.75 million and growing.
Capitalized as debt by the IFC/GEF, Overseas Private Investment Corporation (OPIC) and Starbucks.
Investment Goals: Biodiversity conservation, conservation-oriented job-creation and cost recovery.
Invest in CI’s global priority areas.
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Verde Ventures Overview
Use of Funds: Infrastructure, working capital, trade finance etc.
Instruments: Primarily Subordinated Debt
Investment Size: $30,000 to $500,000
Sectors: Agro-forestry/NTFPs (84%), Eco-tourism (12%) and Others (4%)
Geography: Latin America (60%), Asia (30%), Africa (10%)
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Verde Ventures Results
100% on-time repayment ($2 million)
$3.9 million invested in 15 projects
Improving land use in 600,000 hectares containing over 95 Red-listed species
Supporting enterprises employing over 9,000 local people in 7 countries
Leveraged co-financing of over $2 million in external funding
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Program Expansion
New partnership with UNDP’s Equator Initiative: Equator Ventures
Enterprise Development Services to ensure “bankability” of conservation-SMES.
Maximizing Core Competencies: CI- Project Selection/monitoring UNDP-BDS and Extensive Networks
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Day Chocolate Company
UK based fair-trade chocolate company supporting CI- partner in Ghana.Financing for working capital to purchase cocoa from Ghanaian cooperative. $250,000, 5 year loan plus equity kicker for 3% of the company (Jan, 2002).Initially we had wanted to invest direct in the cooperative (Kuapa Kokoo), but CURRENCY instability prevented this.
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Wildlife Works Kenya
Apparel manufacturer providing local employment in exchange for conservation commitment from community. $150,000 4 year loan with fixed interest plus % of sales (March, 2005).Secured by local collateral plus a guarantee from US-based parent company.Initial plan was to invest $500,000, but investment committee felt the business model was too risky and financial systems insufficient-CAPACITY.
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VV Investments In AfricaOnly 2 investments to date- One off-shoreWhy? The 6 C’s….
CURRENCYCURRENCYCAPACITYCAPACITY
COST COST COLLATERALCOLLATERAL
CO-INVESTORSCO-INVESTORSCOMMUNICATIONSCOMMUNICATIONS
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Addressing the Challenges
CURRENCY: Invest in companies with revenue in hard
currency Set aside $ to cover for exchange risk
CAPACITY: UNDP Partnership and use of BDS providers
such as TechnoServe and hopefully others.COST: Use BDS providers and grant funds to defray
costs- We have a developmental agenda.
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Addressing the Challenges
COLLATERAL: Guarantee Facility to help cover risk.
CO-INVESTORS: Regional/development bank engagement Pilot investments Risk Incentives and information provided on
conservation SME market (IFC’s EBFP)COMMUNICATIONS: Expand networks, direct outreach through
donors, BDS providers, other ideas?
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ConclusionConservation SMEs in Africa have similar challenges of other continents.However, the lack of investments in conservation SMEs is worse in most of Africa than in other regions.Need for incentive mechanisms and guarantee facilities as well as grant-based conservation SME capacity building funds.Commercial banks and MFIs operating in Africa need to know more about conservation SME markets and if demand, develop appropriate financial products.