November 28, 2017

New investment opportunity! Capital 4 Development Asia Fund

Capital 4 Development Partners is a fund management company dedicated to manage impact funds that aim to improve the lives of poor and marginalised people in developing countries through SME financing. They are now launching their new fund: the Capital 4 Development Asia Fund. We had a discussion with Mark Joenje, Managing Partner, to find out more about the fund. 

Mark Joenje

What makes your new fund special?

The C4D Asia fund will focus on investing in SME’s in Asia. We have been able to structure an innovative 3 layered fund structure with different asset classes for investors with different risk appetites. Because we have a 10 million USD first loss facility provided by our sponsor investor ICCO Cooperation, we can offer a downside protection to investors and offer a minimum return of 2% IRR (expected IRR is 5%). Because of this, it is now possible for investors with different risk appetites to invest in the important SME market space that offers great opportunities to create impact and contribute to solving the SDG’s. Another special feature is our Investee Support Facility, that we put to use to help our investees with non-financial support in achieving their ambitions.

Why are you focusing on Asia?

Asia has achieved remarkable economic progress in the last decades. Despite this, it is the home of the nearly half of the world’s poorest people, making poverty a key issue still to be addressed. In our view, SMEs are essential drivers of these local economies and offer multiple innovative opportunities for people to earn decent income, develop themselves and secure their livelihoods. In spite of this role, many SMEs struggle to find appropriate finance and investments to grow. This is the reasoning behind the C4D Asia Fund – we want to address the financing gap for the missing middle.

What type of ventures do you support?

We are looking for growing and inclusive SMEs with a capital need between USD 200k and 2m based in India, Nepal, Indonesia, Cambodia, and the Philippines. Through the fund, we plan to have an impact on the creation of decent job opportunities, on the inclusion in the value chain of small entrepreneurs and suppliers and the improvement of their position, and on providing access to innovative services and products.

What type of support (financial and non-financial) do you provide through the fund?

We target and invest in SMEs that need a financial support between USD 200k and 2m, offering a mix of 60% equity and 40% debt. Also, we provide our investees with non-financial support. Before we finalise an investment, we align with our investees on the business and impact objectives, and make sure we share a common vision. We provide them with coaching, training, small financial grant contributions, access to additional local and international networks, knowledge and expertise.

Can you give us an example of a venture supported through the Fund?

We have invested 310,000 USD in Natural Garden, in Cambodia. Natural Garden has a chain of stores that sell high quality fruits, vegetables and other (processed) food products that are either organic or have been produced using Good Agricultural Practices (GAP). Besides our financial investment, we help Natural Garden with training their supplying smallholder farmers on how to produce organically or use GAP. The company works with its own production farm and store workers, agricultural cooperatives and associations, smallholder farmers, and producers to source its products. Natural Garden runs three shops in Phnom Penh and are about to open a new store in Siem Reap. The investments so far have opened up 55 new direct jobs in Natural Garden, and added 30 companies and over 400 small-scale fruit and/or vegetable farmers to the supplier base of the company.

What plans do you have for the future?

We are currently fundraising to grow the fund to a size of USD 40m. So far, we have two commitments each of 10 m, but we are still looking for USD 20m from other investors. Because we have a layered fund structure with a USD 10m first loss facility, we can offer a solid downside protection and offer a minimum preferred return of 2% IRR to investors, though we project that investors make an IRR of about 5%. We expect to invest with the fund in about 45 companies and have a positive impact on the lives of hundreds of thousands poor and marginalised people in South and Sout East Asia.

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