A new investment fund to support and align investments in sustainable enterprises has been launched in Accra.
The fund, ‘New Africa Mobility Fund’ (NAM), is an initiative of the Africa Investment Group and will focus on supporting development opportunities, enhancing economic opportunities and reducing vulnerability of the poor along with providing a consistent long term return on investments.
“The alchemy for social investors is to deploy resources where both the need and potential impact is greatest whilst generating credible returns.
There is an imminent requirement to provide liquidity into global trade. Multilateral development banks (MDBs) have been making efforts to fill the trade gap.
Trade and structured finance are naturally commercially viable businesses, particularly when experienced financiers mitigate risk and grasp the business modalities of the marketplace, in this case the African continent.
“While MDBs with robust balance sheets and credit ratings can create facilities to de-risk to promote trade, funds such as ours would be able to achieve the same and even more with vigilant efficacy and an altruistic disposition,” Dr. Sam Ankrah, Chief Executive Officer of the Africa Investment Group, said in Accra.
He said the country and the African continent have been ‘bereaved’ of essential prosperity as it has not been able to benefit from new opportunities offered by the evolving global economic landscape.
Explaining the rationale behind NAM, Dr. Ankrah said there is the need to find tailored solutions in markets that are seen as fragile and high risk by commercial banks.
“There are clear benefits to support trade finance and structured credit in any effort to promote social development.
Low income countries and fragile states, which are considered high risk by commercial banks are often the first to suffer in times of credit squeeze.
This is equally true of small enterprises in developing markets.
Small businesses and new ventures are very often the largest source of employment and job growth, and supporting their success has immediate and obvious development outcomes,” he said.
He added that: “Trade finance and financing in general default rates are higher in Africa and are averaging four percent but with experience and adroit application, an average default rate of less than one percent would easily suffice.”
The intervention is expected to solve the astronomical funding gap in the country that inhibits social development.
Currently, around a third of African countries, including Ghana have interest rates in excess of 10 percent on loans offered on a non-sovereign basis and cash collateral requirements of up to 50percent of the value of the loans.
These, according to Dr. Ankrah, are prohibitive terms that are seriously impeding development in Ghana and on the continent.
NAM, among other things, he said, would place emphasis on supporting private enterprises with prudent public assistance to meet their investments and working capital.
The fund will also support direct investments, financing in socially progressive businesses, improve the macroeconomic resilience of countries by protecting their important export industries against external failures in liquidity and confidence.
“We place a strong emphasis on private sector development, which is seen as vital to economic and social progress. Trade facilitation is an essential part of social development.
“Interventions in mobilising trade, improving supply chain and proficiency of the people directly impact poverty reduction, while trade and finance in healthcare, energy and food has significant influence on development outcomes,” he added.