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Managers of an African investment fund have come up with a win/win situation for both their investors and small start-up businesses that looks set to pay dividends for all concerned

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Creating a circle of prosperity

Written by Sheree Hanna An investment fund offering investors the chance to put their money in top performing African companies in what is a rapidly growing economy is also helping to make...

http://www.africanbusinessreview.co.za/finance/1132/Creating-a-circle-of-prosperity


Creating a circle of prosperity

- Finance - Oct 12, 2012

Written by Sheree Hanna

An investment fund offering investors the chance to put their money in top performing African companies in what is a rapidly growing economy is also helping to make a difference to hundreds of grass roots entrepreneurs.

UK-based Alquity Investment Management established The Alquity Africa Fund which has to date supported 974 entrepreneurs in Africa with some 2,000 loans totaling £25,502.

Alquity believes in fair distribution of prosperity and aims to benefit local communities in developing countries from the bottom up. Through its partner Opportunity International UK, it has set up microfinance projects to provide businesses in rural Africa with access to loans and banking facilities.

OFFERING A LIFELINE

Opportunity International UK uses mobile banks to provide bank services to customers in remote areas, while mobile phone banking allows regular access to bank accounts and micro loans assists in business ventures, and insurance policies protect against risks to possessions.

The average loan size is just $57 dollars, but this has acted as a lifeline for people like Dorothy Salif, a 20-year-old mother of two who runs a small business selling dried fish in Limbuli market. With the profits Dorothy has made from her loan so far, she is renting a building in the market where she stores her fish as well as renting it out to other fish sellers to store their own stock.

Her vision is to have a working capital of 200,000 kwacha within two years. Before Opportunity International came along, Dorothy didn’t have access to a savings account. Instead, she would tie up her money in her clothes to keep it safe.

Now, however, she uses the mobile bank to deposit her takings and make withdrawals. Her loan officer says she is “very entrepreneurial and creative” and she will have the potential to take on larger loans in the future.

PROFITS BOOST

Stanley and Justina Fongulo have also benefited from a loan which has helped with the stall they run selling ground nuts of various grades and beans. Justina runs the stall while Stanley travels far and wide sourcing stock. They are hoping, with the help of the loan, their profits will continue to increase to between 700-1,000 kwacha a week.

The Alquity Africa Fund was set up with three main pillars to its business model: attractive returns, sustainable investment and transforming lives. The name ‘Alquity’ is taken from an amalgam of altruism and equity and the fund aims to make a virtuous circle of investment.

Patrick Muir, Alquity’s Commercial Director, said: “People are not always confident that they are dealing with companies who are acting in a moral and sensible way. There are some companies that jump on the bandwagon but not always offering what they should.

“You have to put your money where your mouth is.  At Alquity we live up to our ethical stance. It does make our fund attractive to those investors who want to put back something to the community. It benefits them in two ways because if you help start a small business it is putting money into the economy, which then has a knock on effect for the investor as the economy they have invested in grows stronger.”

DOUBLE BONUS

There is also a double bonus for investors in the Alquity Africa Fund as the cash donated for the microfinance projects comes out of the management fees. Alquity donates a minimum of 25 percent of its management fee revenue. In this way, it makes investors feel like they are giving to charity without having to spend any money.

Since the Africa fund was established it has attracted $20 million worth of investment and holds stocks in some of Africa’s most well known companies. These include MTN, the largest mobile telecomm operator in Africa, Pan-African conglomerate Lonrho Plc which operates in the agricultural and infrastructure markets and leading independent, oil and gas exploration and production company Afren, which is present in 12 African countries.

Alquity’s partnership with Opportunity International UK has been instrumental in the success of the microfinance projects. Muir said: “Clearly you need good infrastructure to make sure that money is genuinely going to the right people and is not just swallowed up so our partners in this make sure the finance is getting to them.”

Such has been the success of the project that Alquity is now considering expanding it further. “We are looking at expanding the project and maybe looking to finance larger start-up enterprises, bigger scale entrepreneurs who are perhaps needing hundreds or thousands in loans and we are looking at maybe developing a mentoring system,” said Muir.

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