New Urban Finance Facility for Africa
United States of America
Last updated 12 May 2020, by Impactyield.
Emerging countries (256) / Africa (127) / Eastern Africa (50) / Kenya (12)
The New Urban Finance Facility for Africa (NUF) will provide catalytic capital to African financial institutions to stimulate lending for housing microfinance and basic services infrastructure.
The NUF Facility will enable local financial institutions in Africa to serve growing market demand for housing microfinance and basic services by the rising middle class, those earning between $2 and $20 per day, who have the desire and the ability to spend part of their discretionary income on improved living conditions if suitable housing finance were available to them. The market for housing microfinance and basic services improvement lending to this market segment in growing African cities is estimated at over $4 billion in the Facility’s top four target countries alone (Ghana, Kenya, Tanzania and Uganda).
Financial institutions in Africa are expressing a demand for catalytic capital to increase lending to this expanding client base for housing and basic services improvement. The NUF management team has developed investment structures through previous work in Africa that are designed to assist local banks to reach these target populations. Successful pilot project investments made by the NUF management team under UN-Habitat programs have created demand for follow-on investments.
The Facility will make three types of investments:
1. Tier II Capital investments in banks, housing finance institutions and microfinance institutions demonstrating commitment to expanding into housing microfinance. Tier II Capital in the form of preferred stock will enable these clients to raise additional debt or attract additional core deposits for longer tenor lending.
2. Project-related Investments in FI sector clients for on-lending to affordable housing and community upgrading projects, including provision of water, toilet and shower blocks and market stall installations with water and sanitation facilities. The NUF investments will help meet the demand for construction capital for affordable housing and basic services installation. (Example: Investment in local banking institutions for on lending to community upgrading projects. Previous successful track record includes development of market stall improvements and shower and toilet facilities managed by community organizations.)
3. Regional Credit Enhancement program with DFIs: The NUF will make an equity-type investment in a credit enhancement program to encourage global commercial banks with operations in Africa to offer medium term working capital loans to local financial institutions.
Returns to investors will consist of interest on Facility investments, paid on a pass-through basis and investment upside (e.g. equity kickers, conversion of convertible preferred to equity and exit from equity.)
of track record
the year funded
Access to Basic ServicesAgricultureCommunity DevelopmentDigital AccessEmploymentEnterpreneurship SupportEnterpriseIndependent MediaInformation Communication & ConnectivityInfrastructureInfrastructure DevelopmentLabor & EmploymentResponsible TechnologyResponsible TechnologySustainable Agriculture
Key performance indicators
Asset manager: NewLine Investment Advisors
Product track record: Fund has 11 years of track record
Target IRR: 11%
Committed Capital: 0 USD (US Dollar)
Target return category: Risk-adjusted market-rate of return Below risk-adjusted market-rate of return
Fund domicile: United States of America
Product status: Open - no committed capital
Inception year: 2012
Vintage year: n.a.
Target region: Africa, Eastern Africa, Emerging countries, Kenya
Target close date: 01/12/2012
Product term: 8 years + 2x one-year ext.
Assets under management: 100,000,000 USD (US Dollar)
Investment size: Min: 1,000,000; Max: 10,000,000; Avg: 5,000,000
Co-investment policy: LPs have priority, With LPs and non-LPs
Currency of investments: USD (US Dollar)
Currency for fund / product figures: USD (US Dollar)
Fund investments to date: 0
Fund investments to date exited or repaid: 0
Management fee: 2%
Carried interest: 20%
Hurdle rate: 5%%
GIIN Investors' Council Investment: No
Limited Partners / Investors: n.a.
Limited Partner / Investor Type: Development Finance Institution (DFI), Endowments/Foundations, Family Office, Pension Funds, Other Institutional Investors
Phone number: 914-484-8090
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Impact goals for the Facility include:
1. Increased private sector investment in the financial institutions sector in Africa:
- Capacity building: to enhance the ability of local financial institutions to lend (i) to low income urban community groups to finance basic infrastructure and sanitation facilities, and (ii) to lower income individuals and individuals with informal income for living condition improvement (larger sums and longer term)
- Scale: Catalytic investment by the NUF will be leveraged by local banks and financial institutions, using increased allocation of deposit-based finance and local market debt (leverage ratios are estimated at between 1:1.5 and 1:4)
2. Increased access to finance (housing microfinance, basic services infrastructure finance)
- Development of housing microfinance and urban infrastructure financial products for low income borrowers ($2-20 per day) or community groups
3. Increased provision of services (water, sanitation, drainage) and well-constructed shelter, which will improve health and education outcomes and sustainability, particularly in fast-growing urban areas in Africa
4. Increased scale and efficiency in poverty reduction, adding to household assets and quality of life of African families
A separate technical assistance facility (targeted at $1.5 million) is planned for policy related, pre-investment research and developmental technical assistance.