Kampala, June 2, 2022 – The Danish Investment Fund for Developing Countries (IFU) and the European Union (EU) were integrated today as new shareholders of aBi Finance Ltd.
This is the culmination of a shareholder agreement signed between the Royal Danish Embassy, the European Union and the IFU to enable further investment in aBi Finance, marking the reorganization of aBi Finance as as a business entity.
The EU is investing $8.7 million in aBi Finance, with the IFU rounding out that $9 million amount.
These investments will enable aBi Finance Ltd. to transition from a company limited by guarantee to a company limited by shares, to commercialize its operations, to attract more investors and to create a broader overall impact.
The combined IFU and EU investments, totaling approximately $18 million, will enable aBi Finance Ltd to further support the growth of agribusinesses and improved livelihoods of beneficiary smallholder farmers through the creation new jobs and increased income.
It is expected to benefit 27,000 new beneficiary customers and create UGX 14.5 billion in additional revenue and 900 additional jobs per year.
Additionally, the capital increase will prepare aBi Finance Ltd for the future, optimize its operations and continue to help businesses thrive after the COVID-19 pandemic.
It will also maximize returns for its shareholders and increase access to finance for green businesses and investments through aBi’s Green Challenge Fund.
The Danish Ambassador to Uganda, HE Nicolaj A. Hejberg Petersennoted that:With over 12 years of involvement in aBi Finance, we are pleased that the institution is now mature for greater commercialization.
This will make aBi Finance much more sustainable. The new investments from IFU and the EU will ensure aBi Finance’s continued support to smallholder producers and agribusinesses in Uganda.
A commitment that has been and still is of great importance to the work of the Danish Embassy in Uganda”.
The investment in aBi Finance holds promising potential to increase financial services to small rural farmers, giving them more opportunity to grow their business and improve their livelihoods.
But to create a strong business case in which to invest the IFU, we needed concessional funding, which we secured by co-investing with the European Union’s Blended Finance Mechanisms, said Mr. Anders Frigaard, Senior Director of Investments at IFU.
“The EU is pleased to partner with the Danish Investment Fund for Developing Countries (IFU) to de-risk their investment in the Agribusiness Initiative (aBi) as part of a genuine European team approach.
We are confident that with this additional capital injection, aBi will be able to reach more smallholder farmers in Uganda with better products, tailored to their needs.
Access to finance will positively impact their small businesses and lift many people out of poverty” said European Union Head of Cooperation, Ms Caroline Adriaensen.
“With the acquisition of new investments, aBi Finance has demonstrated that it is a sustainable and professionally managed organization that can and will continue to attract foreign direct investment.
We are confident that this investment will add to our past and ongoing initiatives to develop a competitive, profitable and sustainable agribusiness sector in Uganda.” said Mrs. Mona Muguma-Ssebuliba, CEO of aBi.
Financing of agricultural business initiatives (aBi Finance)
Since 2010, aBi Finance Ltd has been sustainably fostering the growth of agribusiness value chain actors by boosting access to finance through; provide liquidity, reduce the risks of agricultural finance and strengthen the capacity of financial services actors to provide financial services to agribusinesses.
For the period 2010/2021, aBi Finance Ltd has completed the following steps:
- disbursed a total of 1.4 million new loans worth UGX 3.5 trillion
- capital fund size (UGX177 billion);
- number of beneficiaries of credit lines (425,000);
- number of beneficiaries of agricultural guarantees (191,000);
- open savings accounts (UGX 359 billion);
- savings volume for FIs (1.1 million); and
- number of farmers accessing agricultural insurance (240,000)
Prior to this capital injection from IFU and EU, aBi Finance’s capital fund size was over USD 50 million (around UGX 200 billion) with an average return of 10%.
The Fund is invested in lines of credit, loan guarantee scheme and term deposits.
The Danish Embassy and Danida
Denmark and Uganda enjoy a strong bilateral relationship, a cooperation that spans more than 50 years involving the strengthening of Uganda’s economic development and democratic institutions.
At last count, the budget was $50 million a year. To further Denmark’s goal of supporting stable economic development in Uganda, in 2010 Denmark and Uganda jointly founded the Agricultural Business Initiative (aBi).
Since the foundation, Denmark has made significant investments in aBi Finance, amounting to 31 million. usd.
These investments have enabled aBi Finance to provide wholesale financial products to financial institutions for onward lending to agribusinesses and their smallholder farmers across the value chain, which has increased the level of trust in the agricultural finance and sector lending.
The Danish Investment Fund for Developing Countries (IFU)
The Developing Countries Investment Fund is a Danish impact investor that contributes to green, just and inclusive societies and supports the Sustainable Development Goals.
We provide venture capital to companies operating in developing countries and emerging markets in Africa, Asia, Latin America and parts of Europe. Investments are made on commercial terms in the form of equity, loans and guarantees.
IFU has co-invested in over 1,300 companies in over 100 developing countries and emerging markets.
The investments contracted total 31 billion euros, of which IFU contributed 3.4 billion euros. The capital under management amounts to 1.7 billion euros.