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 NAIROBI 00000857 002 OF 002 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