Africa: Verdant Capital Hybrid Fund completes a USD 9 million investment in LOLC Africa

[Deeq A.]

JOHANNESBURG, South Africa, June 27, 2023/ — Verdant Capital (www.Verdant-Cap.com) is pleased to announce that its Verdant Capital Hybrid Fund (the “Fund”) has completed a USD 9 million investment, structured as a holding company loan in LOLC Africa Singapore Limited (Pvt) Ltd (“LOLC Africa”), which will be invested in the lending subsidiaries in Zambia, Egypt, Kenya, Tanzania, Nigeria, Malawi, Zimbabwe, Ghana, and the Democratic Republic of Congo. LOLC, which was founded in 1980 in Sri Lanka, entered the African continent in 2018. Verdant Capital Hybrid Fund is the first external investor in the Africa operation, testament to the firm’s catalytic mission. The investment will help expand LOLC Africa’s footprint of micro, small and medium enterprises (MSMEs) financing in Africa. In addition, LOLC Africa is expected to benefit from initiatives supported by the Fund’s technical assistance facility.

LOLC is one of the best performing global microfinance groups, and the investment is in-line with the Fund’s strategy of picking the top performer of each theme or category. Its business model is targeting the “bottom of the pyramid”, including increasing access to MSME financing and customer deposits, thereby driving LOLC’s financial inclusion goal.

The Fund’s investment will provide LOLC Africa with more funding to support and expand the lending activities of its existing subsidiaries in Africa, which are mainly targeted at micro, small and medium sized enterprises (MSMEs). In addition, the investment will strengthen the capital bases of the existing and potentially new subsidiaries in Africa. LOLC’s expansion of the MSME lending model is not only about pursuing its commercial ambition but doing so in a sustainable and socially responsible manner to deliver tangible benefits to those communities at the bottom- of-the-pyramid, who are often underserved by formal financial institutions including commercial banks, thereby promoting financial inclusion, job creation, income generation, and economic growth. The investment represents a diversified exposure to different markets in Africa following LOLC’s entry into Africa and as they scale their African business.

The Fund’s investment is yielding a return aligned with the Fund’s return target.

Verdant Capital Hybrid Fund is investing in inclusive financial institutions on a pan-African basis, with a focus on digitally enabled financial institutions providing services to micro, small and medium-sized enterprises. The Fund is investing in hybrid capital instruments including subordinated debt, mezzanine instruments, preference shares and stapled investment structures. The Fund has a size of USD 36 million as at First Close in December 2021 (target of USD 100 million at Final Close in 2024).

Suits & Advisors (“S&A”) acted as an advisor to LOLC on this transaction.

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