FSD Africa invests £ 3million in Kenyan company IMFact Quick Finance
FSD Africa Investments (FSDAi), the investment arm of FSD Africa, has announced a Â£ 3million investment in IMFact, a growing financial technology company that uses supply chain finance to deliver working capital for micro, small and medium-sized enterprises (MSMEs).
As a âpooled receivablesâ factoring company, IMFact purchases pooled invoices from MSMEs for a mix of cash and deferred payments. This gives sellers access to liquidity without the need to track or wait for bill payments, freeing up capital to buy new inventory, pay vendors, and grow the business.
IMFact’s âpooled receivablesâ model differs from the pre-existing practice of discounting invoices whereby the best receivables or invoices are selected by the finance company, which means that the rest of the receivables pool cannot be used. as a guarantee. It also offers faster access to working capital than the invoice discount typically offered by banks because it does not require an initial deposit or collateral.
Funding for FSDAi, the first external capital investment in IMFact, comes at a critical time as Covid-19 has placed undue pressure on MSMEs in many sectors, especially in the health sector. IMFact’s innovative solution is particularly timely because of its ability to generate additional cash-flows that have hitherto been blocked.
Under current plans and subject to further fundraising, ImFact is expected to provide total funding of Â£ 475million to around 570 companies over the next five years and support around 5,600 jobs.
Many of the MSMEs that are expected to benefit are family businesses, especially those that distribute medical equipment and pharmaceuticals to public and private organizations. However, IMFact will also work with supply chain companies in other sectors.
Among the first to partner with IMFact is ABC Pharmacy Ltd, which supplies pharmaceuticals to pharmacies, hospitals and clinics across the country but struggled due to insufficient working capital.
With funding from IMFact, ABC Pharmacy is now transitioning its business model by extending its credit terms to customers. Thanks to the increase in available capital, the company was able to increase its sales and develop its activity. ABC Pharmacy CEO Dr John Muturi said: âFunding from IMFact will be a game-changer for our future business operations.
FSDAi’s ultimate goal in making this investment is to encourage the development of technology-based ‘debt pool’ finance across Africa. Our analysis shows that Africa lags behind global averages for this type of financing representing less than 1% of global volumes. On the continent, only South Africa has a highly developed factoring model, while penetration in Kenya is less than 2%.
IMFact was established in 2019 by Cardano Development (CD), an incubator and fund manager based in Amsterdam, the Netherlands, with funding from KfW on behalf of the German Ministry of Economic Cooperation and Development (BMZ). It received initial capital from the Rockefeller Foundation and Convergence. IMFact Kenya is the first regional hub to become operational and was developed by CD with financial support from Total Impact Capital Advisors (TIC).
Comments from FSD, IMFact and others:
Jane Marriott, British High Commissioner to Kenya, said: âRecovering from COVID-19, strengthening Kenya’s status as a financial services hub and creating jobs are at the heart of the UK’s strategic partnership with Kenya. We are delighted to support this investment by FSDAi in IMFact, which will help SMEs in Kenya recover from the challenges of the pandemic. “
Anne-Marie Chidzero, Director of Investments, FSD Africa Investments, said: âWe are delighted to be working with IMFact to support rapid financing of MSMEs in Kenya at a time when many are struggling to access working capital from traditional lending institutions. . . We are particularly eager to see the impact of the investment on Kenya’s medical and pharmaceutical sector and hope to encourage further scaling up of fintech solutions to address the funding gap among small businesses.
Peter Fiala, Chief Investment Officer of IMFact, said: âIMFact is extremely pleased to have successfully passed the in-depth review of FSDAi’s due diligence process, which paved the way for it to become an essential investor in IMFact. after the successful financial close of our third cycle. increase in capital. This investment paves the way for other capital investors, including debt, to support the further deployment of capital for our rapidly growing client list. “
Joost Zuidberg, CEO of Cardano Development, said: âWe are delighted to welcome FSDAi to IMFact to support our initial growth in Kenya and our expansion into other African markets. We are passionate about financial services innovation and believe that IMFact will prove to be a radical change in the wide access of African MSMEs to working capital. With its innovative approach using debtor pooling to mitigate risk. IMFact has a highly competitive product that directly addresses the barriers for African MSMEs to access formal and affordable finance.