MEDA has a 70-year history of market-driven development and deploying impact investing globally. Grounded in their mission to bring business solutions to address poverty, their mandate is to create decent jobs in the agri-food system.

Through a market systems approach to business and technical value creation and access to capital for entrepreneurs, MEDA works across the entire agri-food ecosystem with ’farmpreneurs’ and ‘agripreneurs’ especially women and youth, with a focus on environmental sustainability, gender equality, use of technology, inclusive financial services, and impact investment. MEDA’s goal is to create or sustain decent jobs (direct, indirect, and induced) that allow women and youth to sustainably take care of their needs and build resilient communities.

We spoke with Dorothy Nyambi, President and CEO of MEDA about MEDA’s role in the Mastercard Foundation African Growth Fund, what they hope to achieve, how they apply a gender lens theory of change, how the Fund’s design will catalyze additional investment, and more.

Can you tell us about MEDA’s mandate and how blended finance fits into that?

From 1953 to date, blended finance has been crucial to MEDA’s success. We have invested our MEDA Risk Capital Fund in impact-focused funds, financial institutions, and small businesses in agriculture. This catalytic evergreen fund has $24.8 million invested in 26 different investments, both direct debt equity and via investment funds. In 2021, investments under the MEDA Risk Capital Fund contributed to 83,000 decent work opportunities.

As an early leader, MEDA partnered with the Government of Canada in 2013 to pilot the use of concessionary finance, raising private capital for development-related investments in private equity and trade finance. These partnerships also involved providing technical assistance to funds and SMEs, supporting the achievement of the Sustainable Development Goals.

Uniquely, MEDA makes program-linked fund investments to maximize impact. We know attracting commercial capital and leveraging patient capital, such as investments from the Mastercard Foundation, enables us to achieve sustainable development through ecosystem building while delivering attractive returns.

The Mastercard Foundation African Growth Fund is a unique initiative. Can you tell us about it and what it is that you are looking to achieve? What does present and future success look like?

The Mastercard Foundation Africa Growth Fund (the Fund) is a unique and catalytic initiative. It offers capital and technical assistance to African fund managers and other forms of intermediary vehicles, some of whom are perceived as risky by the investment community. This fund focuses on creating 15,000 decent jobs with an overall job effect of 250,000 through a very intentional, flexible, and adaptable ecosystem-building approach.

By taking an ecosystem-building approach, the Fund will crowd in additional capital by strengthening African investment vehicles (venture capital funds, small and medium sized enterprise (SME) debt funds, permanent capital vehicles etc.) and de-risk them. The goal is to create and/or sustain dignified and fulfilling work for young people, especially young women, in Africa. The Fund’s investment vehicles (IVs) are working with portfolio companies — a majority of which are high growth SMEs.

To achieve the Fund’s goals and deliver on ecosystem-building and jobs, MEDA was brought into a consortium with specific expertise. MEDA leads the Fund with Investisseurs & Partenaires (I&P) as the Fund Advisor, ESPartners (ESP) as the Business Development Services (BDS) provider, Genesis Analytics as the learning partner, Africa Communications Media Group (ACG) leading communications, and the Criterion Institute as the Fund’s gender diversity equity and inclusion partner. The Fund will invest in 20 IVs based in Africa during the next five years.

How will the Mastercard Foundation Africa Growth Fund mobilize additional private capital into the various investment vehicles (IVs) that you invest in?

The Fund's investment policy is designed to enable investment approvals that will catalyze and provide comfort in mobilizing additional investors.

1. The Fund’s investments may be structured as a blend of instruments to de-risk IVs, including straight equity, quasi-equity, concessional debt, and to some extent, risk sharing or first loss capital.
2. The Fund may anchor an IV to reach its first close ahead of other investors by committing significant capital and dialing back our portion of the funding structure of the IV as other investors commit.
3. The Fund has the ability to support early-stage IVs with working and warehousing capital facilities to enable fund managers to establish their operations, teams and demonstrate an investing track record.
4. The Fund’s offerings include significant value creation resources that can be applied at the IV or portfolio SME levels – pre and post investment. Accelerator cohorts will support select early-stage fund managers to improve “investment shortcomings”, who will then be showcased to like minded investors to consider the opportunities.
5. The Fund works to enhance the ecosystem by collaborating with associations and other stakeholders to convene networking sessions, industry events, knowledge-sharing platforms, and investor education sessions that champion the cause of first time female and early-stage fund managers, demonstrating their viability and mobilizing other investors through our investment decisions.

How does the Fund apply a gender lens approach to its theory of change?

We recognize that financial systems are rooted in patriarchal and colonial norms and assumptions that uphold unequal power, privilege, and bias. Traditional Gender Lens Investing (GLI) approaches — that don’t shift investing assumptions and address power dynamics — won’t impact equity and risk being exploitative. Unequal power dynamics that exclude women and youth access to, and benefit from, investments must be dealt with, starting within the consortium and at every stage of investment. We are committed to ending gender and intersectional power imbalances (i.e. gender, diversity, equity, and inclusion) in investment.

The Fund has embraced 2X Global’s criteria for financing women. It aims for women founders, or 51 per cent ownership; 30 per cent leadership in senior management, boards and investment committees; and between 30 to 50 per cent share of women in the portfolio companies’ workplaces.

Thus, we require that IVs must satisfy one gender-lens criteria within their teams by the time they reach their first close, or, if prior to the first close, in the year following the Fund’s disbursement of IV investment capital:

• For multiple partner teams, at least one female partner (a founding partner with a shareholding in the General Partnership, Chief Investment Officer, or Investment Director) who is part of the decision-making, and women representing at least 30 per cent of the overall team beyond marketing, human resources or investor relations roles;
• For single partner teams (male or female), at least 30 per cent of the team must be female, beyond marketing, human resources, or investor relations roles.

Collaborative knowledge gained informs the deepening of Gender Diversity, Equity, and Inclusion (GDEI) and Environmental, Social, and Governance (ESG) capacities and strategies over the life of the program.

Can you share details of the two GLI funds that you have invested to date?

Our first investment is with Aruwa Capital Management, a Lagos-based, female-founded and female-led, early-stage growth equity and gender lens fund, focused on investing equity and equity-linked capital into established and fast-growing companies in Nigeria and Ghana. The company is led by Adesuwa Okunbo Rhodes, the Founder and Managing Partner. Aruwa Capital only invests in businesses that align with its gender lens criteria.

Our second investment is Inua Capital, a gender-lens, ESG-lens, and impact-focused investor managing fund that provides patient growth capital to Ugandan SMEs. Inua was founded in 2021 with a local investment team. It pioneers private equity investment and will accelerate the growth of 30 to 40 local companies into sustainable, responsible, and profitable titans of Uganda. The company is led by Kim Kamarebe, Founder and Managing Director. Stay tuned for more investments soon.

Domiciliation of IVs on the African continent is a big area of focus for the Fund. Can you tell us why this is important? What are some of the obstacles/bottlenecks faced by IVs in domiciling on the continent?

In addition to the Fund’s objective to catalyze capital into 20 Africa-based IVs and ultimately sustain decent jobs through SME growth, an equally important vision of the Fund is to build the ecosystem of risk capital investing in sub–Saharan Africa, making it easier for local and foreign investors alike to commit to African IVs. Opening up Africa domiciliation is key in attracting local investors including pension funds.

The Fund believes that, by urging and supporting fund managers to domicile in Africa, either on a parallel, feeder or other basis, other investors will come alongside, mobilizing investor confidence on the continent.

The obstacles and bottlenecks faced by IVs in domiciling in Africa include the complex and varied regulatory environments across different African countries. For the most part, rules and regulations cover the broad financial sector and very few are customized to the needs of investment vehicles — fewer still have established support institutions and specialized services providers (such as legal and accounting firms and management companies) with expertise specific to fund structures in place. Each jurisdiction has unique rules, licensing requirements, and reporting obligations, making it cumbersome for IVs and unpredictable for investors. Another obstacle is the relatively underdeveloped capital markets and limited availability of local investors, which has reinforced reliance on foreign capital. Further, the perception of political and economic risks in Africa can deter potential investors and create additional hurdles for IVs trying to fundraise.

To improve this ecosystem constraint, the Mastercard Foundation in conjunction with the Fund team has commissioned a study on the various domiciliation options available to IVs on and off the continent to establish characteristics, pathways, and recommendations to support jurisdictions, IVs and investors with guidance on domiciliation options in Africa.

What are some interesting or unexpected challenges MEDA has had to navigate in the blended finance space thus far?

MEDA has had several blended finance challenges. Attracting commercial capital remains difficult due to lingering risk perceptions from in-grained biases. Overcoming these biases is crucial to scaling up investments to the level needed. We’re confident the Fund can change that for more risk averse investors.

Also, these complex deals require specialized expertise. With complicated regulatory environments, the Fund needs local knowledge. Thus, access to local financial and legal expertise is crucial to success. Finally, like many blended finance initiatives, measuring impact and additionality remains a challenge. For this Fund, we partnered with Genesis Analytics, a learning partner who leads on measuring impact and assessing value.

Based on MEDA’s involvement in blended finance, what gaps or opportunities do you see in the larger blended finance market?

Presently, blended finance levels remain stagnant while the Sustainable Development Goals (SDG) funding gap grows. There is opportunity for more blended deals and funds to support SDGs and we need them more rapidly.

One significant opportunity is to bridge the gap between impact investing and traditional donor-led development. The challenge lies in uniting impact investment with existing technical assistance programs, as these two functions operate separately. Bringing them together is vital.

To increase blended finance impact in gender equity, investors can play a large role by expanding Gender Lens Investment capital, improving representation, and demanding robust gender analysis. Building in criteria for GLI for blended finance activities is important to concretely determine investment impact.

How do you see MEDA's blended finance activities evolving in the future?

MEDA’s blended finance activities are evolving. We are exploring more funds we want to develop in other parts of the world. We will continue to employ blended finance. We see impact when we match investments with development programs – program linked investments. Our vision for a prosperous, equitable, and sustainable future for Africa, and the world, relies on using blended finance to accelerate economic development, foster market systems that generate sustainable jobs at decent income levels, and ensure food security.