The partnership aims to mobilise institutional capital for private sector projects in Africa via the ILX Fund I, which is backed by Dutch pension funds. It will also support a new fund set to be launched in coming months.
The African Development Bank (AfDB) is the latest development institution to sign a partnership agreement with ILX Management (ILX) in support of the Dutch-based fund manager’s $1.05bn emerging market focused private credit fund and its future funds.
Under the agreement, the AfDB will work with ILX to scale up investments and help mobilise capital from institutional investors in private sector projects targeting UN Sustainable Development Goals (SDGs) and climate action in the AfDB’s 54 regional member countries.
The fund has a scalable private credit investment strategy being deployed in developing countries through co-financing with multilateral development banks (MDBs) and other development finance institutions (DFIs). It is targeting investments in energy access and clean energy, sustainable industry and infrastructure, inclusive finance, and food security.
In addition to the AfDB, the Asian Development Bank, Dutch development bank FMO, German DFI DEG and the European Bank for Reconstruction and Development (EBRD) are among those that have signed partnership agreements or memorandums of understanding with ILX.
ILX was co-founded by former EBRD vice president Manfred Schepers and Cardano Development. The fund was launched in January 2022 with a $750m commitment from Dutch pension provider APG on behalf of pension funds ABP and bpfBOUW. This was followed up with a further commitment from Achmea Investment Management on behalf of Pensioenfonds Vervoer, which brought the fund size to $1.05bn. Grants from Germany’s KfW, and the foreign ministries of the Netherlands and the UK helped finance its early-stage development.
So far, the fund has made 17 investments totalling around $400m with five institutions. These are spread across Africa, Latin America, Asia and Middle East, covering areas including renewable energy, financial institutions, manufacturing, transport, logistics and agribusiness.
Second fund set for launch by year-end
Schepers told Impact Investor that he expected ILX Fund I to be fully invested by the first quarter 2024.
“We will therefore be launching ILX Fund II this year, following the same strategy as ILX Fund I in partnering with all the leading MDBs and DFIs in the SDG and climate-targeted projects across the emerging market and developing economies. We anticipate that we will have participation from other leading Dutch and European pension funds in addition to our existing investors,” he said.
The AfDB hopes its cooperation arrangement with ILX will help mobilize much needed financial resources from institutional investors to close the continent’s financing gap. The partnership will support non-sovereign operations in the development bank’s “High Five” priority areas of light and power, food, industrialisation, greater continental integration, and improved quality of life.
Hassatou N’Sele, the AfDB Group’s vice president, said the MDB’s objectives were aligned with those of ILX and that the AfDB had “a strong track record of structuring and financing projects with a strong development impact”.
The partners said, said all loan investments would offer attractive risk-adjusted returns, combined with robust environmental, social and governance (ESG) safeguarding.
Schepers said in a 2022 interview that mobilisation of private capital lending in emerging markets in conjunction with MDBs was urgently needed because “the traditional source of private sector finance in emerging markets and developing economies through the international banking system, has effectively ceased”.