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22 Dec 20

Member Spotlight with Florian Kemmerich & Jean-Philippe de Schrevel from Bamboo Capital Partners

Member Spotlight with Florian Kemmerich & Jean-Philippe de Schrevel from Bamboo Capital Partners

Bamboo Capital Partners (Bamboo) is a specialist impact investor working in frontier and emerging markets with development agencies and financial institutions to advance innovative financing solutions that deliver lasting impact at scale. Bamboo creates growth opportunities to improve the lives of the world’s most marginalized and underserved communities through its investments in businesses that cater to the lowest-income earners. Bamboo has been active for over 10 years in private debt and equity, with investments in Latin America, Asia and Africa, focused on financial inclusion, agribusinesses, and access to clean energy, healthcare and education. Since its launch in 2007, Bamboo has proven that private capital can be profitably deployed as a tool for effective change in addressing low- to middle-income populations in developing countries.

Given the development of SDG500, a first-of-its-kind blended finance impact investment vehicle, and the increasing shift towards technology and gender lens investing, Convergence connected with Bamboo’s Managing Partners, Jean-Philippe de Schrevel, also the Founder of Bamboo and BlueOrchard Finance, and Florian Kemmerich, to learn more about Bamboo’s investment strategy, views on blended finance across their respective geographies, and strategic priorities to mobilize private investment towards the Sustainable Development Goals (SDGs) and emerging markets.

Bamboo has been making investments to address challenges facing underserved markets for 13 years. What has the journey been like? What stands out when reflecting on this past decade?

Florian: Bamboo was created by Jean-Philippe 7 years after he co-founded Blue Orchard Finance, which initially focused on debt funding in emerging markets, specifically addressing the microfinance sector. Over time, after pioneering landmark blended finance transactions, we learned the need was greater than debt financing in emerging markets. Private equity emerged as an important piece of the puzzle to address underserved populations. So, we started with a private equity fund and then grew into a more exploratory pioneering fund called the Oasis Fund (now closed), which was also sector agnostic, thereby allowing the team to venture into a broad range of sectors. Through the Oasis Fund, we developed a focus on healthcare, clean energy access, education and fintech.

Jean-Philippe: There has been considerable evolution in the field since we started. With experience we learned that in testing new business models and going to the early small and medium enterprise (SME) segment– the “missing middle”–in frontier and Least Development Country (LDC) markets, it is difficult to propose market-based returns and impact and attract significant sources of private capital without de-risking through blended finance. This is a lesson that investors, including impact investors, have learned more recently. Blended finance allows everyone to stick to the mission of true, granular, in the trenches, social and environment impact, and channel the money where it is most needed and most efficient, while offering risk-adjusted, market-based returns to private investors. This is something I would not have recognized 20 years ago. In addition, the evolution of the digitalization of goods and services with technology as the backbone of new business models is also one worth mentioning given its power to improve access and affordability. There has also been a big movement among the asset-owner generation towards profit with purpose. This tells me we are in the era of impact investing. That feels good.

Can you shed some light on Bamboo’s investment thesis and why blended finance as an approach is well-aligned?

Florian: There has been an evolution on this front as well. When we looked at our legacy funds, which were once only private, we asked ourselves: How do we achieve scale? We thought about the small ticket sizes, the need to have local presence in our target geographies, the digital divide across remote regions, and the real and perceived risks of investing in emerging markets in developing countries. And, about 3-4 years ago, we realized we needed to make two big strategic commitments: we needed to (i) embrace technology and focus on it as a key enabler for access to affordable goods and services, and (ii) invest in strategic partnerships to match the investment appetites of private sector investors and meet our desired targets for impact and financial returns. In implementing this strategy, Bamboo was enabled to:

  1. Bring private sector actors and development actors together, uniting unique skill sets, expertise and resources to meet development challenges, which often means providing the private sector with on-the-ground insight, data and resources to build local understanding and respond to localized issues.
  2. Transform public and philanthropic capital into catalytic capital, which helps adjust the risk level of a transaction to meet the investment appetite of private investors.
  3. Allow deal sponsors to leverage technical assistance offered by development partners, further de-risking transactions while improving the probability for positive impact outcomes.
  4. Fundraise with greater ease, given appropriate risk-return levels that match the investment mandates of institutional and commercial investors.

Blended finance is all about strategic partnerships. It respects the type of capital available, makes it highly efficient, and encourages all participants involved to do what they do best to optimize the expertise and resources available, while staying strongly tied to impact outcomes. It is what makes it well aligned to our institutional priorities and investment strategies.

Bamboo and Palladium Group (Palladium) recently initiated a long-term partnership to mobilize USD 1 billion in impact capital by 2023, convening Bamboo’s knowledge of institutional and private sector investors and track record on impact investing in emerging markets, with Palladium’s pipeline of investible opportunities. Can you talk more about this partnership and the opportunities that exist to scale blended finance?

Jean-Philippe: We got along from the very beginning because we were mission aligned. Palladium saw a partnership with Bamboo as a way to round out their advisory and consultancy business. From our perspective, Palladium brings a complimentary client base, expertise, and an opportunity for Bamboo to insert an asset management dimension to the many proposals they are responding to. In fact, a couple of months after signing the deal, we started working on a couple of asset management projects, which will help deepen and broaden the range of projects Bamboo will be managing. It is too early to share more, but we are delighted about this strategic partnership. It is one that is truly mission aligned and skill complementary.

How has Bamboo historically considered gender in its work and investment strategy, and going forward, how does the team intend to employ a gender lens?

Jean-Philippe: At the beginning, when we were hyper-focused on microfinance, gender lens investing was a natural, built-in dimension of our business, as most of the clients of microfinance institutions are women. As we moved into other sectors like energy, healthcare and smallholder finance in agriculture, we progressively developed the gender dimension of our various investment strategies. We added additional criteria like performance metrics to assess impact, which Marie Puaux, Head of Impact Management, is heading. We also recently welcomed Katherine Milligan as Head Gender & Diversity, to make sure the organization is pursuing a lateral approach to integrating gender and diversity internally and across our investment portfolio. Together, Marie and Katherine are ensuring that Bamboo’s gender lens is taken into account ex-ante, rather than only reported on ex-post, and incorporated throughout our entire investment process.

Florian: Gender is on the forefront for all our funds, and we see a lot of opportunity when we look at the investment landscape for climate and narrowing the digital divide. It is why the work we are doing with CARE and the International Trade Center (ITC) with the CARE-SheTrades Fund is exciting. This partnership is offering a bespoke fund that is effectively convening Bamboo’s asset management and fundraising/fund deployment rigor, and experience structuring transactions, with CARE’s substantial global track record in delivering a gender lens to development challenges, and in offering technical assistance on the ground, with ITC’s capabilities in working with governments in the same geographies we invest in. Our focus is to start in South and Southeast Asia and then double-down in other geographies across Sub Saharan Africa.

Regionally, Convergence has seen a decline in the number of transactions targeting Latin America and the Caribbean in relation to other regions. However, our database suggests renewed interest in the region, with 35% of the transactions currently fundraising on our platform targeting Latin America and the Caribbean. What can you tell us about this uptick?

Jean-Philippe: It is not an easy one. For one, we never abandoned Latin America. Bamboo has one of its three regional offices based in Bogota, Colombia. We have deployed Financial Inclusion Fund 1, Financial Inclusion Fund II, Oasis Fund, and are fundraising for BLOC Latin America throughout the region. It might be fair to say the lesser activity in blended finance in this region is a result of the pull to Africa, given the fast growth population, scale of opportunity and apparent poverty. When looking at development finance institutions (DFIs), their focus is largely in Asia and Africa because there are more LDCs in those regions than in Latin America.

Florian: Activity on Convergence’s fundraising platform is encouraging. The uptick could be a likely outcome of the increased interest in ESG investing and climate action, and the opportunities to combine financial returns with social and environmental impact especially in forestry and biodiversity. I do expect blended finance activity will increase in this region, given the geopolitical situation and government transitions underway. This rebalancing is important otherwise countries in Latin America will continue to face capital deprivation, placing their economies and people at sizeable risk and vulnerability to future economic, political and environmental shocks. We hope others join us in the region.

One of the key sectors of focus for Bamboo is healthcare. What are your observations for how blended finance can help advance healthcare solutions? What needs to occur to mobilize private capital and achieve investor confidence in this space?

Jean-Philippe: With regards to primary and secondary healthcare in low-income markets, where we have invested in physical infrastructure development (e.g., chains of hospitals and pharmacies), while we have seen advancements in increasing access to healthcare, financial returns in this space have been difficult to earn. Investing in physical infrastructure is a very challenging business if you do not include technology into the equation (e.g., medical devices and tele-medicine). As a result, Bamboo is refocusing its investment strategies in healthcare to build on technology for access. While we are clearly going into uncharted territory here, we remain equally motivated to attract private sector investment that is commercially driven, which is why our health-tech strategies use a blended finance approach to de-risk these transactions and mobilize greater private capital.

Florian: Blended finance is the ideal tool to invest in capable structures and embrace technology to deliver business models that have a sustained value and are not dependent on government funding, especially when targeting the ‘last-mile’ population. To attract private investors and mobilize their capital, there needs to be greater alignment across the public sector on pricing to scale affordable access and invite insurers in, who are an important part of the solution framework as they finance these solutions and shape the cost of healthcare. If corporations are able to resolve the price point in the market, that can unlock a huge underserved market in terms of patient acquisition. We also need more understanding on the assembly required to do small investments on the ground with real impact that mobilize large institutional investors, which is why organizations like Convergence are important, given the fragmented nature for how investments are approached in this sector; either with the lens of healthcare delivery (e.g., platforms, healthcare, clinics), pharmaceuticals (e.g., medicine), or health-tech (e.g., medical devices). Blended finance can help companies move beyond corporate venturing and participate in structures that create real health outcomes. At Bamboo, we see blended finance as a vital structuring tool to create synergies amongst all the various actors when designing complex structures targeting healthcare in emerging markets. It is complex and will remain complex.

Bamboo became a member earlier this year. How has your membership with Convergence supported your work and effort to help deliver on the SDGs and scale financing in developing countries?

Florian: What we like about Convergence is its multi-stakeholder view when it comes to core donors, engagement, and channeling information to investors, donors and deal sponsors. The trainings on blended finance instruments, and now on the sector series, are necessary convening grounds as you bring in stakeholders from diverse sectors operating in both the public and private space. On the fundraising side, there has been a learning curve, since we have never worked with a digital platform to assist with raising capital. We do consider the fundraising platform as an important tool as we look to fundraise for SDG500, currently listed on the Convergence platform, which is deep-rooted in public-private partnership and englobes private equity and private debt and six subfunds, including the CARE-SheTrades Fund, a mixed hybrid fund. So, there is a lot to be communicated. We are fully embracing the support from Convergence in identifying some of the newer suspects in the private sector, and in bridging the knowledge gaps in blended finance to accelerate capital commitments targeting the SDGs in developing countries.

As we approach the end of 2020, what are you most looking forward to at the start of 2021?

The vaccine, and to move forward with SDG500, because we believe it is truly scalable and replicable.

__Are you interested in becoming a member of Convergence's global network for blended finance? Tell us you're interested. __

By Namrata Narayan, former Communications Lead (Interim) at Convergence

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