Apis Partners LLP
Evidence for the UK Parliament's International Development Committee's inquiry: Investment for Development: the UK’s strategy towards development finance institutions
February 2023
Introduction
This paper is presented as evidence for the International Development Committee's inquiry of November 2022: Investment for Development: the UK’s strategy towards development finance institutions.
This paper is written and submitted by Apis Partners LLP ('Apis'), a UK-based private equity asset manager that manages investments in growth-stage financial services and financial infrastructure businesses globally, including in emerging markets countries across Africa and Asia. British International Investment (‘BII’) is an investor in two funds currently managed by Apis: Apis Growth Fund I and Apis Growth Fund II (the 'Apis Funds').
This paper presents evidence for the following areas of the Committee's terms of reference:
- What current investments does BII hold?
- How does BII evaluate the impact of its investments?
To address these specific terms of reference, the following areas are presented in this paper:
1) BII's investment into the Apis Funds
2) The development impact that the Apis Funds help to create, and how details of this are shared with BII to help them evaluate the impact of their investments in the Apis Funds
3) The benefits for Apis and the Apis Funds from working with BII
4) The benefits for BII from working with Apis and investing in the Apis Funds
1) BII's investment into the Apis Funds
Apis is a UK-based private equity asset manager that supports growth-stage financial services and financial infrastructure businesses globally by providing them with catalytic growth equity capital. Apis manages two Africa and Asia emerging markets-focused private equity funds: Apis Growth Fund I and Apis Growth Fund II.
BII is an investor in both Apis Growth Fund I and Apis Growth Fund II, and as such, is an indirect investor in the investee companies that the Apis Funds have invested in - these are financial services and financial infrastructure companies that provide formal financial services and related services to low- and middle-income communities across Africa and Asia.
Apis is highly conscious of the economic development impact that the provision of growth capital for financial services and financial infrastructure businesses in growth markets can achieve, and as such, has twin goals of delivering strong financial, as well as social impact returns, for its investors. Apis also achieves both of these goals by recognising the importance of rigorous environmental, social, and corporate governance ('ESG') principles, and by actively encouraging the adoption of these within the Apis Funds’ investee companies.
More information on Apis' impact mandate can be found online at: https://apis.pe/returns-with-responsibility/
2) The development impact that the Apis Funds help to create, and how details of this are shared with BII to help them evaluate the impact of their investments in the Apis Funds
The development impact that the Apis Funds help to create
Apis creates social and development impact by supporting the growth of companies that serve low and middle-income consumers (directly and indirectly) that create good quality equal opportunity employment, and that contribute to the deepening of the financial sector in the regions in which they operate. These companies democratise access to more transparent and affordable financial services, increase financial inclusion and financial wellness, and digitise the formal financial sector; these contributions are an inherent feature of the Apis Funds’ investment mandate, and the Apis Funds' investee companies contribute to nine of the United Nations Sustainable Development Goals.
Fund investments managed by Apis have positively impacted the lives of millions of people, and Apis has helped to deliver strong growth in a number of key impact metrics across the portfolios of the Apis Funds. The aggregate scale of measured impact across the Apis Funds is outlined below (across three main dimensions) - this is provided for the calendar year ending 31 Dec 2021, and is aggregated across the Apis Funds that BII has invested in to date: Apis Growth Fund I and Apis Growth Fund II:
ACCESS
- Individual clients served directly: 50.5m
- SMEs served: 1.1m
- Financial services touch points (branches, agents, ATMs): >670k
QUALITY
- Transaction volume: 1.6 bn
- Transaction value: US$ 25.0bn
MARKETS
- Countries of operation: 84
- Total employees (full-time): >44k
- Female employees (full-time): 31%
Examples of investee companies of the Apis Funds and the impact they create
Three examples of the Apis Funds' investee companies (that BII are / were indirect investors in) are provided below, including details of the development impact that they create:
i) Direct Pay Online (Apis Growth Fund I portfolio company from June 2016 to October 2021)
Company overview
Direct Pay Online ('DPO') is a leading online payment service provider in Africa. DPO processes payments from all major credit cards, mobile money, and e-wallets, allowing merchants operating in its markets to accept online payments through a wide range of payment types. The company has an operational presence in 21 markets across Africa.
Impact created by DPO
- By supporting a cashless electronic payment infrastructure across Sub-Saharan Africa, DPO has facilitated the transition towards digital payments across these economies, which represents a key focus area for governments in the region, as an important tool to increase efficiency, reduce shadow economic activities, and ultimately boost economic growth
- Electronic payments are a key enabler of financial inclusion by reducing friction and increasing efficiency for MSMEs, which are the drivers of economic growth in emerging markets. At the macro level, increased transparency of electronic payments (vs cash) also increases fiscal receipts to local governments
- DPO's diverse product offering and extensive network provides their SME customers (merchants) with the means to accept all types of electronic payments supplemented by value added services, allowing them to expand their customer base and reduce friction
- DPO has significantly expanded the range of payment types available to payers in these markets and allows all types of merchants to accept payments, thus enabling the growth of these businesses
- DPO also offers a merchant cash advance product which provides their SME customers with an alternative source of business funding - cash advances backed by future receipts, to help further grow their businesses
ii) Sun King (Apis Growth Fund I portfolio company from November 2017 to January 2023)
Company overview
Sun King (formerly known as Greenlight Planet) is a leading provider of off-grid solar financing products for energy and financially underserved consumers in Africa and Asia. The company has focused on providing the most affordable and highest quality products in the market that are also the most available, through broad-ranging local distribution partnerships (indirect distribution), as well as sold directly through the company’s own network of retail stores and sales agents (direct distribution).
Impact created by Sun King
- When Apis Growth Fund I first invested in Sun King, 1.2 billion people (c. 20% of people globally or 434m households globally) spent over $27 billion per year on dim, non-environmental energy for lighting (such as kerosene and car batteries) (as per figures from Bloomberg New Energy Finance)
- The company’s low-cost Sun King domestic solar lighting and power devices provide consumers with multi-room lighting and phone charging capabilities - to date, Sun King has powered the lives of 95 million people across 40 countries
- The company’s products help families live brighter, safe, and more productive lives, whilst reducing harmful greenhouse emissions, by substituting costly and polluting kerosene-powered lamps
- Studies estimate that kerosene-fuelled lighting contributes to 0.5% of global emissions, mainly due to black carbon emissions resulting from incomplete combustion of kerosene. Off-grid solar systems mitigate these adverse environmental and climate effects
- By offering affordable financing for its solar devices, the company increases the accessibility of its products and helps more consumers to gain access to clean, off-grid sources of light and electricity
- Sun King provides predominantly unbanked consumers with their first access to formal financial services (by extending credit in the form of a high-value asset that is paid off over time), which creates behavioural credit history / scores for these consumers that could help them to gain additional services in the future
iii) TymeBank (Apis Growth Fund II portfolio company from March 2021 to Present)
Company overview
TymeBank ('Tyme') is a leading South African digital bank with national distribution, servicing, and a cash -in / -out footprint. To date, Tyme has served over 5 million low- and middle-income banking customers and has achieved this large-scale distribution through partnerships with leading local companies such as The Foschini Group, Pick’n’Pay Boxer stores, and the Zion Christian Church. Today, Tyme offers its customers current account and savings account services, salary advance, merchant solutions (point-of-sale, banking, and lending) and social commerce services.
Impact created by TymeBank
- Tyme enables access to banking services and in doing so broadens formal financial and economic participation for the un- or under-banked population in markets that it operates in
- Tyme’s use of technology to deliver digital banking structurally lowers the cost of banking in South Africa and extends financial services access into underserved segments of the population (beyond that which is achieved by traditional branch-based banking). Furthermore, Tyme’s lower cost-to-serve enables the Bank to pass on cost savings to its customers while maintaining sustainable levels of profitability
- The issuance of an electronic payment instrument attached to Tyme accounts allows customers to benefit from more efficient payment means and furthers the electronification of payments within the local market
- The Company’s geographic expansion opportunity into South-East Asia will serve to further multiply the Bank’s impact, by addressing similar structural challenges around financial inclusion as those observed in South Africa
How details of the development impact created by the Apis Funds are shared with BII to help them evaluate the impact of their investments in the Apis Funds
To help BII evaluate the impact of their investments in the Apis Funds, Apis provides BII with an annual ESG & Impact report which details for each of the Apis Funds' investee companies: their impact created, their key impact performance metrics, their contributions to the United Nations Sustainable Development Goals, their broader ESG & Impact achievements, as well as the impactful nature of their products and services. This report also provides details of how ESG & Impact activities are managed within the Apis Funds, including updates and improvements made in this regard. In addition, Apis also provides BII with an annual non-financial report in BII's specified format, which details the performance of the Apis Funds' environmental, social, business integrity, and governance systems (the funds' ESG policy / processes, capacity, and due diligence and monitoring processes) as well as additional economic and employment data for each of the Apis Funds' investee companies.
3) The benefits for Apis and the Apis Funds from working with BII
There are a number of benefits for Apis arising from working with BII and the relationship with BII more broadly - three such benefits are outlined below:
i) The provision of catalytic capital for emerging markets in Africa and Asia
BII has been an investor in the Apis Funds since the first close of Apis' first fund (Apis Growth Fund I) and as such, BII has played a critical role in providing catalytic capital for the provision and democratisation of formal financial services in the emerging markets of Africa and Asia, that the Apis Funds have invested in. BII helps to facilitate the Apis Funds' equity investments in essential and inclusive financial services business models across these geographies, where the development impact of this focus is clear, and has been demonstrated to be important for the longer-term alleviation of poverty across these regions. In the time that the Apis Funds have been investing in financial services across Africa and Asia (since 2015), the number of adults globally (aged 15+) that are formally unbanked (do not have access to a formal financial services account) has decreased from 2.2 billion in 2014, to 1.4 billion in 2021 (as per figures from the World Bank) - Apis and BII’s activities have contributed to this increase of c. 830 million banked adults globally over the last few years.
ii) Thought leadership around ESG and Impact
BII is known for being a global thought leader in the areas of ESG and Impact. The presence of BII as an investor in the Apis Funds has meant that Apis has been able to directly benefit from BII's ESG and Impact thought leadership in the development of Apis' own ESG and Impact platform. This is demonstrated, for example, in BII's extensive ESG requirements that Apis has incorporated tightly into its own ESG and Impact management processes, for both Apis internally, as well as the Apis Funds' investee companies; BII being an indirect investor in the Apis Funds' investee companies has ensured that these businesses are operating to the highest ESG standards and to the very latest and best practices in this regard. Through this relationship with BII, Apis expects to continue to be able to benefit from BII's thought leadership in this area and sees this as being critical for the further positive development of the Apis ESG and Impact platform with new initiatives around climate and gender.
iii) Enhancing Apis' credibility around ESG and Impact requirements and more generally
As a result of the relationship with BII, Apis' ESG and Impact requirements of the Apis Funds' investee companies are extensive, and Apis has implemented ESG and Impact capabilities within investee companies that are often new to these concepts. In this context, Apis has been more effective in demonstrating the importance of these ESG and Impact concepts and requirements to investee companies when outlining to them that BII is an investor in the Apis Funds. BII's presence as an investor in the Apis Funds also provides Apis with an enhanced level of credibility when making investments in the Apis Funds' investment regions in general.
4) The benefits for BII from working with Apis and investing in the Apis Funds
There are a number of benefits for BII that result from working with Apis and their investments in the Apis Funds - three such benefits are outlined below:
i) Financial services sector strategic intelligence
Apis' domain specific expertise enables BII to gain strategic intelligence about the financial services sector, which has a unique role to play in economic development within emerging markets, in the form of the expansion of access to formal financial services to un- and under-banked individuals and business in these regions. Financial inclusion and the democratisation of finance are core tenets of the Apis Funds’ impact approach and investment mandate, and the relationship with Apis allows BII to gain access to the latest global financial services industry trends and dynamics.
ii) Access to top-tier investment opportunities within the sector
Apis' expert knowledge within financial services also provides BII with access to attractive investment opportunities within the sector, across the regions that the Apis Funds invest in; the Apis Funds' strong track record in delivering top-tier financial as well as impact returns to BII (as well as Apis' other investors) is demonstrative of this. This is not only a function of Apis' industry expertise gained through investing in all sub-verticals of the financial services industry but is also due to Apis' on-the-ground geographic presence in these markets - Apis has representation in eight countries across Africa, Asia, and Europe.
iii) Proven impact returns alongside commercial returns
The Apis Funds that BII have invested in have demonstrably helped to accomplish BII’s various development agendas in a resource efficient manner by harnessing proven private sector tools to nurture growth businesses and drive employment growth. The Apis Funds that BII has invested in continue to generate clear and lasting social and development impact in Africa and Asia, with strong financial performance, by investing in commercially sustainable and socially impactful companies. The sustainable commercial performance of the investee companies of the Apis Funds (that BII is an indirect investor of) will also serve to further multiply the social impact created by them.
For further information please contact: info@apis.pe or visit: apis.pe
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