Al Hammond

Interview with Kurt Hoffman, Part III

This post is part 3 in a 5 part series.

A.H.: What’s next, and is there a way to pay for technical assistance as part of the investment process, so that an SME fund could be fully self-financing and sustainable?

K.H.: Once we had shown the model worked, and that it could generate a competitive rate of return, we found significant appetite to scale these funds among regional banks and national development funds who did due diligence on our track record. The East Africa Fund was coming together with $20-$25 million, but we found there was still additional interest. So we enlarged the effort to a $100 million fund that will invest in SMEs, including those working outside of the energy sector?that’s what we announced last month in connection with the G-8 meeting. The fund will be structured regionally, initially set up in East Africa, and then scaled to both West and South Africa.

Size matters. You need to capitalize around at least $20-25 million, with deal sizes ranging from $10-500K. Success is really a result of the combination of the fund size and portfolio mix. You want the returns from the good risks to pay for the development activities.