Addressing the Challenges to Investing in Conservation

SMEs in Africa

ABCG Meeting March 22nd 2005

Verde Ventures Approach

Corridors

Economic Incentives

Small Businesses as Conservation Partners

Chronic Lack of Capital

Verde Ventures Overview

$6.75 million and growing.

Capitalized as debt by the IFC/GEF, Overseas Private Investment Corporation (OPIC) and Starbucks.

Investment Goals: Biodiversity conservation, conservation-oriented job-creation and cost recovery.

Invest in CI’s global priority areas.

Verde Ventures Overview

Use of Funds: Infrastructure, working capital, trade finance etc.

Instruments: Primarily Subordinated Debt

Investment Size: $30,000 to $500,000

Sectors: Agro-forestry/NTFPs (84%), Eco-tourism (12%) and Others (4%)

Geography: Latin America (60%), Asia (30%), Africa (10%)

Verde Ventures Results

100% on-time repayment ($2 million)

$3.9 million invested in 15 projects

Improving land use in 600,000 hectares containing over 95 Red-listed species

Supporting enterprises employing over 9,000 local people in 7 countries

Leveraged co-financing of over $2 million in external funding

Program Expansion

New partnership with UNDP’s Equator Initiative: Equator Ventures

Enterprise Development Services to ensure “bankability” of conservation-SMES.

Maximizing Core Competencies: CI- Project Selection/monitoring UNDP-BDS and Extensive Networks

Day Chocolate Company

UK based fair-trade chocolate company supporting CI- partner in Ghana.Financing for working capital to purchase cocoa from Ghanaian cooperative. $250,000, 5 year loan plus equity kicker for 3% of the company (Jan, 2002).Initially we had wanted to invest direct in the cooperative (Kuapa Kokoo), but CURRENCY instability prevented this.

Wildlife Works Kenya

Apparel manufacturer providing local employment in exchange for conservation commitment from community. $150,000 4 year loan with fixed interest plus % of sales (March, 2005).Secured by local collateral plus a guarantee from US-based parent company.Initial plan was to invest $500,000, but investment committee felt the business model was too risky and financial systems insufficient-CAPACITY.

VV Investments In AfricaOnly 2 investments to date- One off-shoreWhy? The 6 C’s….

CURRENCYCURRENCYCAPACITYCAPACITY

COST COST COLLATERALCOLLATERAL

CO-INVESTORSCO-INVESTORSCOMMUNICATIONSCOMMUNICATIONS

Addressing the Challenges

CURRENCY: Invest in companies with revenue in hard

currency Set aside $ to cover for exchange risk

CAPACITY: UNDP Partnership and use of BDS providers

such as TechnoServe and hopefully others.COST: Use BDS providers and grant funds to defray

costs- We have a developmental agenda.

Addressing the Challenges

COLLATERAL: Guarantee Facility to help cover risk.

CO-INVESTORS: Regional/development bank engagement Pilot investments Risk Incentives and information provided on

conservation SME market (IFC’s EBFP)COMMUNICATIONS: Expand networks, direct outreach through

donors, BDS providers, other ideas?

ConclusionConservation SMEs in Africa have similar challenges of other continents.However, the lack of investments in conservation SMEs is worse in most of Africa than in other regions.Need for incentive mechanisms and guarantee facilities as well as grant-based conservation SME capacity building funds.Commercial banks and MFIs operating in Africa need to know more about conservation SME markets and if demand, develop appropriate financial products.