Investment AB Kinnevik, a Stockholm-based international investment firm, announced that it has invested USD 14 million in the African microfinance institution (MFI) Bayport Financial Services. The financing is provided as a combination of debt and equity.

As of June 2007, Investment AB Kinnevik held USD 3.96 billion (SEK 25.6 billion) in total assets. Shareholders’ equity and liabilities also totaled USD 3.96 billion. The Parent Company manages a portfolio focused around three areas: Major Listed Holdings, including Millicom International Cellular, Tele2 and Transcom Worldwide; Major Unlisted Holdings, including the cardboard and paper company Korsnäs; and New Ventures, which actively finds and invests in small- and mid-sized companies with considerable growth potential.

According to a Kinnevik press release, the financing of Bayport is the second major investment in the area of New Ventures for Kinnevik this year. In May, the firm invested in Gateway TV, a company which offers satellite-based pay-TV services in Sub-Saharan Africa. It is expected that the service will be available in 8 countries by the end of 2007. In total, Kinnevik has invested USD 124 million (SEK 800 million) in New Ventures, and the market value of new ventures at the end of second quarter 2007 was approximately USD 150 million (SEK 969 million).

Bayport, founded in 2002, currently has 1,000 employees and 61 branches in Zambia, Tanzania, South Africa, Ghana and Uganda. Bayport serves 150,000 clients, the majority of whom are employed but are unable to access conventional sources of credit. About 20 percent of the MFI’s clients are civil servants who live in rural villages. Bayport deploys teams that travel to villages to disperse loans to people who would otherwise be unable to access financial services.

Bayport clients use the loans for a variety of purposes. Thirty to 40 percent take out loans to pay for education. Twenty percent borrow to fund home improvements. The rest of the loans serve various functions, including funding small businesses and consolidating more expensive debt.

Bayport’s loans range in size from just USD 20 up to USD 1,500. The average loan issued is USD 250–no small amount considering that a teacher in Zambia earns just USD 200 per month. Annual interest is between 70 and 90 percent. The MFI’s repayment terms range from one to 36 months, and repayment rates are high (96.5 percent in Zambia).

No further financial information on Bayport is currently available.

Additional Resources:

Kinnevik: Press Releases: “Kinnevik Invests MUSD 14 in African Micro Finance Company”

Cornell University, The Johnson School: “Giving credit where credit is new: Financial services firm offers African workers an alternative to loan sharks”

Investment AB Kinnevik

Kinnevik: Interim Report 2007 January 1 – June 30

Kinnevik: Major Listed Holding

Kinnevik: Major Unlisted Holding

Kinnevik: New Venture

Bayport Financial Services

Millicom International Cellular

Tele2

Transcom Worldwide

Korsnäs

UGPulse.com: “14 million dollars sunk in a Ugandan Microfinance”

Bloomberg.com: Currency Calculator