Innovare Finance PCC
Last updated 12 May 2020, by Impactyield.
Innovare Finance PCC is designed to increase the availability of capital for African agriculture value chain companies to build their businesses and produce increased food, feed and fiber. The fund provides capital to African agriculture value chain companies, that otherwise may be inaccessible, to build their businesses and produce increased food, feed and fiber. The capital (or financial) leases contracted under the Facility provide access to finance which agro-dealers and processors in Africa might otherwise be unable to obtain. This Facility enables Innovare’s leasing partner to extend financing to African SMEs (small and medium enterprises) to purchase equipment over time through ‘lease to own financing’, paying for the equipment using revenues earned from the sale of products processed with the equipment.
IFM (Innovare Finance Mauritius) has a JV partnership agreement (an operating agreement which does not establish a new company) with the Lessor. IFM also has a loan agreement with the Lessor which specifically designates that the use of the funds lent to the Lessor is to provide financial leases for equipment to SMEs of the agricultural processing value chain. The Lessor’s interests are aligned with IFM as it is extending its business, taking advantage of the risk mitigation organized by IFM to expand its business lines to 1. Capital leasing, 2. The Agricultural Sector and 3. SME businesses.
Innovare Finance PCC, domiciled in Mauritius (“IFM”), a single purpose company of Innovare Advisors LLC (“Innovare”), is offering up to US$25+ million in senior (75%) and subordinated (25%) debt to provide a Lease Financing Facility for small and medium sized (SME) agricultural value chain businesses in Africa. These are 4-year notes with yields of 7% and 12%, respectively. The entire financing facility is supported by multiple guarantees and risk mitigation strategies. The capital paid in to IFM is on-lent to Innovare’s partner, an established leasing company headquartered in Kenya with subsidiaries in Rwanda, Uganda, Tanzania and Zambia and active expansion plans.
Equal rights to ownership basic services technology and economic resources
Encourage companies to adopt sustainable practices and sustainability reporting
Universal access to safe and nutritious food
Sustainable food production and resilient agricultural practices
Promote policies to support job creation and growing enterprises
Increase access to financial services and markets
Key performance indicators
Asset manager: Innovare Advisors
Product track record: Fund has 8 years of track record
Target IRR: 7%
Committed Capital: 5,400,000 USD (US Dollar)
Target return category: Risk-adjusted market-rate of return
Fund domicile: Mauritius
Product status: Open - committed capital
Inception year: 2014
Vintage year: 2015
Target close date: n.a.
Product term: 4 year term
Assets under management: 25,000,000 USD (US Dollar)
Investment size: Min: 100,000; Max: 1,000,000; Avg: 250,000
Currency of investments: USD (US Dollar)
Currency for fund / product figures: USD (US Dollar)
Fund investments to date: 1
Fund investments to date exited or repaid: 0
Management fee: n.a.
Carried interest: n.a.
Hurdle rate: n.a.
GIIN Investors' Council Investment: No
Limited Partners / Investors: n.a.
Limited Partner / Investor Type: Development Finance Institution (DFI), Endowments/Foundations, Family Office, Other Institutional Investors, Retail Investors
African SMEs face borrowing rates that are high, with burdensome collateral and guarantee obligations. In many cases, the SMEs are the companies which buy agricultural produce from small holders, increasing demand for locally harvested grains. SMEs welcome the availability of a new source of financing by way of access to financial leases, as opposed to operating leases, a form of asset based financing, as a method for purchasing equipment.
• Financiers: Competitive returns protected with multiple risk mitigation strategies
• Manufacturers: Increased equipment sales facilitated by new financing sources,
• Local leasing partner: Increased business driven by demand for agricultural equipment, and
• African SME food and feed processors: The capability to (1) accelerate purchases of equipment to increase the processing of grains and soy, (2) increase purchases of grains and soya for processing, and (3) produce more nutritious food and feed locally.
• African farmers, including smallholders, who grow and sell grains: Increased sales to local processors; new markets for crops,
• African livestock farmers: Increased supply of locally produced animal feed,
• Food supply: Increased food for local and global markets, and
• African consumers: Increased volume of locally produced, nutritious food and feed; Improved food availability and security; reduced food imports. Potential for exporting more processed foods.