MISSION KENYA RESPONSE ON PROPOSED OPIC FINANCING - GEF

UNCLAS SECTION 01 OF 02 NAIROBI 000857

SIPDIS

STATE ALSO FOR AF/E AND AF/EPS

STATE PLEASE PASS TO OPIC AMEETA PATEL

TREASURY FOR VIRGINIA BRANDON

PLEASE PASS USAID/AFR/EA

SIPDIS

E.O. 12958: N/A
TAGS: EINV EFIN KE
SUBJECT: MISSION KENYA RESPONSE ON PROPOSED OPIC FINANCING - GEF
AFRICAN CONSUMER FUND

REFS: (A) STATE 27714 (B) 07 NAIROBI 4443 (NOTAL)


1. U.S. Mission Kenya appreciates having the opportunity to comment
on OPIC's proposed loan guaranty for a $150 million private equity
fund entitled the "GEF African Consumer Fund." As ref A explains,
the fund will provide investment capital for established, high
growth companies involved in the consumer goods and services
sectors. For additional context, please see ref B, which reports on
a meeting held by Econ/C in November 2007 with one of the founders
of the GEF African Consumer Fund.


2. On March 26, Econoff spoke with a representative of the fund's
implementing partner, the African Management Services Company
(AMSCO),which has its East Africa branch office in Nairobi.
Lovelace Kwasa, a senior project manager with AMSCO since 2002, said
her company supports the development of a broad spectrum of
businesses throughout the region. Its focus, however, is developing
capacity for the financial services sector, thereby enabling banks
and other lending institutions to more readily provide loans to
small and medium enterprises (SMEs). AMSCO specifically assists
financial institutions which offer affordable banking services to
borrowers not serviced by big banks. (Note: a 2006 study of Kenyan
borrowers concluded that only 26.4% of Kenya's estimated 17.4
million adults used the formal banking system. The study asserted
that Kenya needed a "deepening" of its financial sector in order to
serve more potential clients. End Note.)


3. In addition to financial services, AMSCO provides management and
capacity building expertise to African businesses. Kwasa explained
that AMSCO places experienced managers with African companies
interested in expanding their operations but lacking professional
capacity. "Our goal is to assist local companies to become
competitive, both nationally and internationally," she said.


4. At present, AMSCO is funding financial institutions and
providing managerial expertise to firms in Kenya, Uganda, Tanzania,
Rwanda, and Southern Sudan. AMSCO intends to begin operations in
Ethiopia, Madagascar, and Mauritius by the end of 2008. Kwasa
outlined its current activities in East Africa:

-- In Tanzania, AMSCO is supporting the establishment of a privately
owned and operated halal abattoir, which Kwasa claimed would be
capable of processing three times the amount of meat slaughtered by
the Kenya Meat Commission (KMC). AMSCO is also involved in
developing Tanzania's dairy industry and is providing technical
assistance to three locally owned insurance companies.

-- In Uganda, AMSCO is assisting a number of financial, banking, and
insurance companies. It is also working with the government in
improving the local educational system.

-- In Kenya, aside from the financial sector, the firm is directing
its attention to the export and manufacturing sectors. Its two
horticulture clients are 100% locally owned. AMSCO also supports
the expansion of Fina Bank-Kenya, which bills itself as Kenya's "SME
Bank." In so doing, AMSCO has enhanced the bank's ability to
provide loans to small-scale business owners, farmers, and ranchers.
It continues to second managers to small Kenyan companies eager to
expand operations. (Note: Originally known as the "Finance
Institution of Africa," Fina Bank was the first lending institution

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in Kenya to provide loans to small borrowers. End Note.)

-- In Southern Sudan and Rwanda, AMSCO continues to make a concerted
effort to help develop the banking industry and financial sector.
Its principal Rwandan client is Fina Bank-Rwanda. Kwasa said AMSCO
has helped one local bank in Juba open several branch offices (five
headed by women) and expand its workforce from 100 to 300 employees
in the past year.


5. To the best of post's knowledge, African Management Services
Company (AMSCO) has no ties to terrorism, money laundering,
corruption, and other violations of law. It is a highly reputable
company, whose Nairobi branch office reports to the Kenyan Ministry
of Finance. The company's sponsoring partners include the United
Nations Development Program (UNDP),the World Bank's International
Finance Corporation (IFC),and the African Development Bank. Its
East Africa regional manager is Ghanaian Kofi Andah, who holds an
MBA from Baylor University.

RANNEBERGER