In recent years, both local and international crises as well as the consequences of the climate crisis have worsened the situation of economically disadvantaged people in countries of the Global South. People in rural areas in particular are at risk of poverty and hunger due to the effects of the climate crisis, economic shocks and rising fertilizer prices. The use of integrative financial services can make a significant contribution to global food security, because when people have access to the financial sector, they can plan better, build up reserves and invest money. This usually also leads to improved access to sufficient nutrition and high-quality food.*

The microfinance institution Fortune Credit Limited has set itself the goal of promoting the economic development of the rural population in Kenya through suitable savings, credit and insurance services. The company provides integrative financial services that positively transform the lives of local people and increase the resilience and sustainability of the target population. An important branch of the company is green integrative finance, which is achieved through product innovation, partnerships and capacity building, e.g. in the form of loans for renewable energy.

With the loan, Fortune Credit aims to finance the origination and distribution of microfinance loans for the acquisition of environmentally friendly technologies. The technologies include e-bikes, solar home systems, biogas plants and efficient cooking stoves for private households and small businesses. The loan will also be used for the marketing of microfinance loans, for personnel and for legal services. Added to this are management support functions such as costs for training, IT, auditing, accounting and communication as well as the rent over 5 years for additional space in the office building already rented.

*Source: https://www.oikocredit.de/k/n557/news/view/368536/3148/european-microfinance-award-platz-zwei-und-drei-fur-partnerorganisationen-von-oikocredit.html

Fortune Credit’s business model actively contributes to 6 of the UN’s sustainable development goals by supporting climate-friendly technologies through the provision of green financial loans:

The provision of microfinance loans for the purchase of environmentally friendly technologies, such as e-bikes, sustainable cookstoves, solar-powered irrigation and biogas, leads to the conversion of households, institutions and companies to clean energy and the introduction of low-carbon production (Goal 7.2). It also reduces CO2 and methane emissions (Goal 13), which contributes to combating climate change.

In addition, the health and standard of living of local people will be improved through the implementation of the project. For example, the e-bikes help to reduce air pollution, which leads to better air quality and a reduction in respiratory and cardiovascular diseases in urban areas (objective 3.9). The sustainable cookstoves significantly reduce indoor air pollution and reduce the incidence of respiratory diseases, eye problems and other health problems related to smoke inhalation.

Solar-powered irrigation increases agricultural productivity, as solar-powered irrigation systems increase crop yields and enable several growing seasons, which increases the income of small farmers and contributes to economic growth. In addition, the installation, maintenance and operation of solar-powered irrigation systems create jobs and thus support the local economy (Goal 8.4). The increased crop yields lead to higher incomes for farmers and improved food security, which can contribute to poverty reduction (Goal 1.2).

The granting of loans to biogas projects supports sustainable waste management and the supply of communities with a reliable source of clean energy. This reduces the environmental impact of cities (Goal 11.6).

The investments in the areas of electromobility, clean cooking and solar-powered irrigation are crucial for reducing CO2 emissions. In total, the project is expected to save 13,420 tons of CO2 in the first year and 6,920 tons of CO2 annually thereafter.

Electric mobility: Through partnerships with leading companies such as eWAKA and eBee Africa, Fortune Credit is switching to electric bicycles and motorcycles and aims to supply 1000 riders. This switch is expected to reduce CO2 emissions by 2.92 tons per bike per year, which equates to a total reduction of 2,920 tons.

Solutions for clean cooking: Fortune Credit is enabling 2000 small businesses and households to adopt clean cookstoves, each reducing CO2 emissions by 2 tons per year, for a total annual reduction of 4,000 tons.

Solar-powered irrigation: By equipping 1000 smallholder farmers with solar-powered irrigation pumps, Fortune Credit expects to reduce CO2 emissions by approximately 6.5 tons per pump, resulting in a reduction of approximately 6,500 tons of CO2 emissions.

The investment risks associated with the subordinated loan are described in detail in the risk information. With regard to the assessment and limitation of risks for investors, the issuer draws attention to the following special features in the design of the project:

a) Use of a special purpose vehicle:

For the crowdfunding campaign on bettervest, a special purpose vehicle called Afrika Emissions 7 UG (haftungsbeschränkt) based in Germany was established to act as the borrower in this project. It forwards the collected capital as a secured loan to the project owner in Kenya, Fortune Credit Limited (Fortune Credit). The shareholders and managing directors of Afrika Emissions 7 UG (haftungsbeschränkt) are independent of Fortune Credit.

b) Personal guarantee of the shareholders

In the event of a payment default, the shareholders are liable for the repayment of the loans with a personal guarantee.

c) Liquidity buffer of 1,25%

In addition, Afrika Emissions 7 UG (haftungsbeschränkt) will be provided with a liquidity buffer of 1,25% of the issue volume raised (which will also be collected via crowdfunding) in order to be able to intervene or even take legal action in the event of any repayment problems on the part of the local project owner.

d) Currency hedging for the KES/EUR loan:

Currency hedging in the form of insurance is intended to offset the risk of unwanted exchange rate fluctuations. Over the last five years, the exchange rate for the euro in Kenya has risen by around 20%, which means that it is now more expensive to buy euros. As the loan is granted in EUR and repayments are to be made in EUR and the project owner’s business activities are conducted in KES, there is a risk that insufficient cash flows will be available to repay the loan due to unfavorable exchange rate fluctuations. If the KES/EUR exchange rate continues to fall, it will cost the project owner more KES to buy the EUR required for repayment. To mitigate this risk, the project owner will hedge the EUR loan through currency hedging (FX hedging).

The financing plan contains the total projected cash flows for Fortune Credit Limited, which cover the receipt, initial utilization and repayment of the loans.

Investment requirement

The costs for Fortune Credit’s overall project amount to EUR 2,198,000  including bettervest fees. This will finance the granting and distribution of microfinance loans for the purchase of environmentally friendly technologies. The technologies include e-bikes, solar home systems, biogas plants and efficient cooking stoves for private households and small businesses. The loan will also be used for the marketing of microfinance loans, for personnel and for legal services. Added to this are management support functions such as costs for training, IT, auditing, accounting and communication as well as the rent over 5 years for a further 600-800 m2 in the office building already rented.

The term of the loan is 5 years and has an annual interest rate of 8.00% p.a. for the crowd investors. Investors who invest in the project within the first four weeks also receive an early bird bonus of 0.8% p.a. (i.e. a total of 8.80% p.a.). The funding threshold for this project is 50,000 euros. If the funding target is not reached, but at least the funding threshold is met, the project owner will still invest the investor funds to a lesser extent in the above-mentioned investment objects.

Repayment

The loan is repaid from liquid funds that Fortune Credit generates as income from the granting of microfinance loans (interest, fees, commissions) as part of its business activities.