BrandArena: Verdant Capital Hybrid Fund invests USD 9 million in LOLC Africa

Tuesday 27 June 2023

Verdant Capital Hybrid Fund invests USD 9 million in LOLC Africa

Verdant Capital announced that its Verdant Capital Hybrid Fund (the "Fund") has completed a USD 9 million investment in LOLC Africa Singapore Limited (Pvt) Ltd (LOLC Africa), structured as a holding company loan, which will be invested in lending subsidiaries in Zambia, Egypt, Kenya, Tanzania, Nigeria, Malawi, Zimbabwe, Ghana, and the Democratic Republic of the Congo. LOLC, which was started in Sri Lanka in 1980, entered the African market in 2018. The first external investor in the Africa operation is Verdant Capital Hybrid Fund, demonstrating the firm's catalytic objective. The investment will assist LOLC Africa to grow its footprint in micro, small, and medium-sized company (MSMEs) finance in Africa.

LOLC is one of the world's best-performing microfinance organisations, and the investment is consistent with the Fund's objective of selecting the best performer in each theme or category. Its business approach focuses on the "bottom of the pyramid," including improving access to MSME finance and client deposits, hence advancing LOLC's mission of financial inclusion.

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 the Final Close in 2024).

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

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