FinDev Canada entered 2020 with a solid roadmap to achieve its strategic goals. With the advent of the COVID-19 pandemic, we had to adapt swiftly and deftly to the harm and uncertainty brought to markets where we operate. The challenges presented us, though, with unexpected opportunities that we sought to leverage.

Supporting clients from afar with the help of technology

The most immediate impact was the need to offer help to current clients, or consider new ones, from afar. Capitalizing on previous investments in information and communications technology (ICT) infrastructure, we switched rapidly to remote work with no business discontinuity. Instead of travel and face-to-face meetings, we responded virtually to provide more liquidity and working capital to investees. We moved on-site monitoring and evaluation to a virtual format, complemented by enhanced client outreach. We also developed a virtual due diligence methodology to analyze potential deals and maintain our pipeline of investment opportunities.

Adapting in times of need by being agile

Through extraordinary efforts of staff, we reduced transaction approval times, from beginning to end. That contributed to FinDev Canada’s emerging reputation as being innovative, proficient and able to adapt quickly to meet goals. At the end of the year, we were proud to see that we had doubled transaction volumes from the previous year, reinforced our leadership role in gender-lens investing, launched a complementary Technical Assistance Facility, strengthened our impact investing approach, and continued to serve our clients with agility and professionalism as they, too, confronted unprecedented challenges.

Leveraging partnerships to increase our impact

A particular element of strength was the partnerships we reinforced with other DFIs and multilateral development banks (MDBs). Through the 2X Challenge and the DFI Alliance internationally, and through the Canada Forum for Impact Investment and Development (CAFIID) in Canada, we supported each other across a spectrum of activities, important to the growth and resilience of our portfolio.

Growing our capacity in a virtual workplace

Internally, we ramped up recruitment and training, not just to respond to the increased demands emanating from the pandemic, but also to reflect original strategic growth plans. In the face of all that it has harmed, the pandemic has reinforced among FinDev Canada staff a culture that has been a hallmark since our inception in 2018. It is a culture that values agility, adaptation, partnership and responsiveness in service to the growth and development of our private sector business clients.

To ensure alignment with industry standards, FinDev Canada’s impact measurement approach draws on reporting standards such as the Harmonized Indicators for Private Sector Operations (HIPSO), the 2X Challenge criteria and the Global Impact Investing Network’s (GIIN) Impact Reporting and Investment Standards (IRIS).

• In 2020, FinDev Canada continued to build our environmental and social (E&S) risk management infrastructure and capacity, publishing a revised E&S Policy in March and hiring our first E&S advisor in August.
• We worked closely with existing clients to support their COVID-19 prevention and response programs as part of our asset management and risk monitoring process, and evaluated COVID-19-related risks during the transaction screening and due diligence processes.
• We also refined our gender approach, making sure that potential and existing clients have the skills and tools they need to identify and mitigate risks for women in their workforce and the surrounding communities.
• In 2021, we plan to continue to develop our E&S risk management practice, adapting to a dynamic global context that requires a nuanced and client-centric approach to doing no harm while doing good.

FinDev Canada’s Technical Assistance Facility (TAF) was launched in 2020 with funding from Global Affairs Canada (GAC) to enable private sector entities, and market-level players, to deepen their development outcomes and scale sustainably.

In the spring of 2020, FinDev Canada launched its TAF with funding from Global Affairs Canada. Technical assistance (TA) is widely used in development finance to accelerate the performance and development impact of private sector entities and address market-level constraints. With the launch of the TAF, FinDev Canada adds a strategic tool to support investees in their impact journeys, and also further FinDev Canada’s leadership position in areas such as gender action.

The TAF is central to FinDev Canada’s goal of supporting private sector development in emerging markets where entities like our investees are the key engines of economic growth. While our investments inject capital needed for business expansion, TA helps these companies advance development outcomes in an intentional manner. TA builds resilience and strengthens the foundations of private sector entities, which in turn enhances their ability to contribute to inclusive economic growth.

The TAF has three priority areas: gender action, impactful data and business performance. Across these areas, we aim to strengthen private companies’ capabilities to be more inclusive, competitive and impactful.

All projects of the TAF are developed and implemented according to guiding principles which ensure alignment with client needs and promotion of sustainable impact without distorting the market.

Six Guiding Principles

Portfolio development and management

The TAF has launched six projects in its first year. Two projects are with FinDev Canada investees and four address market-level needs, including supporting and advancing women’s entrepreneurship, gender-lens investing, and better impact data measurement.

In 2019, FinDev Canada, CDC Group (CDC) of the United Kingdom, Proparco of France and the Development Finance Corporation (DFC) of the United States, along with the Mastercard Foundation, launched the 2X Invest2Impact business competition, which allowed the identification of a cohort of 100 high-potential, women-owned businesses.

After celebrating the winners at the Global Gender Summit in Kigali, FinDev Canada continued to provide business advisory services to the cohort of inspiring women entrepreneurs. In addition, along with Agence française de développement and Proparco, with the support of CDC and DFC, and the implementing partner Open Capital Advisors (OCA), FinDev Canada developed an offer for continued support beyond 2020 that would cater to the unique needs of these businesses.

Location

East Africa (Ethiopia, Uganda, Kenya, Rwanda, Tanzania)

Results

Created a business community linking winners’ advisory services, including training, professional networking, COVID-19 support, custom mentorship and networking opportunities with potential funders

92

active participants

13

business coaching webinars representing over 5,000 person coaching hours

77

group mentorship sessions organized by sector and representing nearly 30,000 person hours

Key learnings

• Not only do women entrepreneurs need help accessing funding, but they also require tailored support to help them analyze the best options for their businesses, and help to package and pitch to potential financiers. Moreover, they struggle to identify sources of funding.
• Creating networks to exchange and support each other has been extremely valuable, especially during the pandemic.
• Long-term support and mentorship will be very helpful, especially if it can be more individualized.

My goal is to increase my customer base by 30% and also purchase more trucks for transportation. The mentoring will help me provide the best service to my customers and increase my customer base. With the increase, I can purchase the trucks.

FinDev Canada chaired the 2X Challenge between August 2019 and June 2020. Just two years after the launch of the 2X Challenge at the G7 Charlevoix Summit in Canada, the initiative committed and mobilized a total $4.5 billion in gender-smart investments by the end of 2019. Founding G7 DFIs contributed and mobilized $4.1 billion, surpassing the initial target of $3 billion. DFIs remain the primary source of capital toward the challenge (with their own balance sheet representing $2.4 billion of the overall amount), while private sector financiers and other investors accounted for $1.2 billion and $0.8 billion, respectively.

The 2X Challenge also launched the 2X Flagship Funds, a status awarded to established, high-performing private equity funds, focused on emerging markets, that have committed to investing with a gender lens using the 2X criteria. The first fund to receive this status, in September of 2020, was Development Partners International LLP (DPI), a leading pan-African private equity firm with $1.7 billion of assets under management.

Core content contributions of the 2X Challenge in 2020

Lessons learned on gender-lens investing

Recommendations on how to apply a gender lens in response to the COVID-19 crisis

UN Women is a key partner in advancing our strategic objective of women’s economic empowerment. FinDev Canada partnered with UN Women for different initiatives, such as:

Fund design with a gender lens

In November 2020, FinDev Canada, UN Women and Lelapa hosted a virtual session entitled “Fund design: building for the underserved African market with a gender lens.” This workshop brought together more than 50 development finance institutions (DFIs) and general partners (GPs) for an open, honest dialogue on investing with a gender lens in small and medium-sized enterprises (SMEs) in the underserved African market.

In the near term, the priority will be to maintain support to existing clients, responding to their needs as the pandemic evolves and as economies and markets return to a semblance of normalcy. We will focus on delivering liquidity rapidly to target markets, leveraging the intermediary role of local financial institutions. At the same time, we will continue to grow our portfolio and maintain a pipeline of future investments. We will do this by staying in touch with key stakeholders in our priority markets and sectors, mindful of the importance of promoting Canadian impact investing to achieve inclusive, sustainable private sector growth. We will also seek to expand our portfolio by solidifying partnerships with peer DFIs. This will include collaboration on investment or other business operations, including co-investments where appropriate.

To maintain our leadership in gender-lens investing, we will structure more deals that respond more fully to the 2X Challenge criteria and/or promote women’s economic empowerment. The success of these initiatives in 2020 and their impact demonstrates again that investing in women produces multiple benefits that reach across an economy and a society. These efforts will be crucial given the disproportionate impact that the pandemic has had on women, whether in the workplace, marketplace or community. To ensure that our approach is aligned with the realities in our regions of operation, we will review our COVID-19 response with a gender lens and develop a methodology to engage more directly with women in our regions, building on initiatives such as Invest2Impact and the “Fund design: building for the underserved African market with a gender-lens” dialogue.

Our new Technical Assistance Facility will contribute to the success of clients by providing them, or the markets where they operate, with global knowledge, practical experience and data to reinforce the financial support we bring. By helping to build capacity, enhance business performance and achieve greater developmental impact, we move closer to ensuring sustainable, inclusive growth and poverty reduction. We also intend to expand our work with clients in promoting and implementing good environmental and social risk management policies aligned with international best practice.

The benefits of previous investments in our ICT infrastructure were clear in 2020, which is why we will continue to build out our technological capabilities. This will also enable us to take greater advantage of data-enabled business models and digital technology to scale our operations and seize opportunities.

In 2021, we will publish FinDev Canada’s climate change strategy to articulate our positioning and priorities, building on the positive climate impact that we have already delivered over the past three years. This strategy is being developed in consultation with our peers and stakeholders, and it will reinforce how we are promoting both gender and climate action across our investments.

The COVID-19 pandemic is leading us to adjust the way we operate. Reduced travel, for instance, is limiting our ability to be physically present in key markets, an obstacle that we can overcome by working with partners and relying more on smart use of technology.

However, while COVID-19 is creating limitations it is also leading to increased demand for our products and services. In response, we have ramped up productivity while staying focused on results. That approach is bearing fruit: in 2020, we more than doubled our 2019 transaction volumes.

2X Canada is a CAD 75.9 million blended concessional finance facility that will contribute to the socio-economic wellbeing of underserved populations, particularly women, in Latin America and the Caribbean, and sub-Saharan Africa.

Administered by FinDev Canada and funded by the Government of Canada through Global Affairs Canada, 2X Canada will support investments that drive positive impact on women’s economic empowerment – women as entrepreneurs, leaders, employees and economic agents.