Weekly Roundup – 8/10/13: Kicking up working capital
Last month Citi Commercial Bank did something it’s never done before: Make a loan to a social enterprise.
The loan isn’t a corporate social responsibly vehicle, nor is it a grant. This is a business deal, and one of noteworthy size: US $2 million. The recipient, KickStart International (not to be confused with Kickstarter.com, the popular crowd funding site) makes and sells human-powered pumps for rural farmers. Almost as importantly, it helps them to identify business opportunities and in turn, develop even more enterprises and profits.
As of June, Kickstart had sold more than 224,000 pumps, and gauged its impact as moving nearly 700,000 people out of poverty and creating about 150,000 enterprises – mainly across Sub-Saharan Africa. With sales of that many pumps, the economic growth has been exponential, as farmers can irrigate their crops throughout the year – boosting yields and profits along the way. (This is why KickStart has a line of pumps called “The MoneyMaker.”)
“KickStart is a social enterprise that weds a purpose-driven mission with a scalable business model, and we are pleased to join the Skoll Foundation to support its growth plans,” Bob Annibale, global director of Citi Microfinance and Community Development said in a press release. Citi Microfinance provided support and oversight for the transaction.
KickStart is a Skoll Fellow, and Skoll is supporting KickStart’s efforts to gain scale by acting as a guarantor on the Citi loan. To me, this makes the financing vehicle all the more interesting, and could set the table for a new flavor of financing: commercial lending, backed by nonprofit foundations. (Full disclosure: The Citi Foundation is a NextBillion Sponsoring Partner).
This announcement comes against the backdrop of a private equity market that is struggling globally. The Emerging Markets Private Equity Association (EMPEA) reported that Africa continues to be a magnet for capital investment, despite an emerging markets sector that continues to see declines. (Globally, 58 private equity funds had raised $10.8 billion from January to June 2013, down 52 percent from the same time in 2012). According to EMPEA:
“Sub-Saharan Africa had the largest regional increase in investment activity for the first six months of 2013 after record fundraising in prior periods. Thirty-six deals in the region represented US$850 million in capital, a growth of six percent in the number of deals and 45 percent in capital compared to the same period last year.
The second largest deal for emerging markets in the first half of 2013 took place in Kenya, a US$600 million growth investment in Delonex by Warburg Pincus.”
(Unsurprisingly, Delonex is an oil and gas prospecting project, which somewhat skews these numbers.)
I’ve been searching for deals similar in structure to that of Citi/KickStart, outside of private equity or development banking sectors, but couldn’t find any of comparable size. (If you know of any, please do add it to our comments section).
But creative financing in a difficult fundraising environment is exactly what the doctor ordered. And I’m sure this deal will be watched in the weeks and months to come, and certainly during next month’s Social Capital Markets Conference.