Responsible Investing

Responsible Investing

Scipion and its senior management team are committed to responsible investing and believe this is essential to long term success.

Working closely with SMEs in emerging markets, Scipion is uniquely placed to identify and bring about meaningful and lasting improvements in the Environmental and Social practices of firms and organisations operating in less economically developed countries, and thereby bring about positive changes in the lives of millions of people.

The firm follows an Environmental, Social and Impact (“ESI”) risk management policy which was established, and is continually updated, with the help of expert and independent partners. The policy is implemented by a committee with representatives from the group’s investment and legal team.

The policy requires that each investment is evaluated individually, monitored for its duration and reviewed at appropriate intervals.

The committee has adopted a sophisticated approach that seeks to manage the implicit trade-offs of ESI investing and bring about tangible and significant improvements in the practices of investee firms, drawing upon expert advice where appropriate.

Investment Overview

Scipion has provided financing to a grain trading and processing company operating in Uganda whose vision is to feed East Africa sustainable through a regionally-integrated formal system for grain production and exchange that transforms rural lives and creates stakeholder value.  Established in 2012, the company sources, processes, and stores maize before selling to off-takers, such as the World Food Programme, across Uganda, Kenya, and Rwanda. The company’s off-takers use the maize to produce products, including nutrient-enriched, therapeutic food, to meet the nutritional demand of the region’s growing population.

To-date in 2017, the company’s produce has provided a years’ worth of low-cost, high-value food for over 600,000 refugees in East Africa. Additionally, the company sources 80% of its maize from smallholder farmers through one of the company’s holdings, which maintains support centers in western and southern Uganda.  These support centers drive tremendous social impact for disadvantaged Ugandan communities by offering farmers a location to sell their maize through a reliable process at fair pricing, as well as providing them access to competitively priced and certified agricultural inputs, knowledge, demonstrations, extension services, and loans for working capital.  To date, these centers have provided over 45,000 farmers with agricultural finance, markets and/or inputs.

Investment Highlights1

Investment TypeSenior Secured Trade Finance
StructureRevolving Facility
Facility Amount2$7,500,000
Interest Rate3Three Month Libor +12.00%
SectorGrain Sourcing and Processing
Cash Flow Coverage Ratio4≥1.44x
Environmental, Social, and Governance Screens
Compliant
Impact Objective(s)
Productivity & Competitiveness Improvement; Job Creation; Wage Increase; Capacity Building; Agricultural Productivity; Food Security; Access to Financial Services

Market Overview

Uganda is classified as a low income country by the World Bank.5 Between 2010 and 2016, GDP growth rates averaged approximately 5.3%.5 The country’s economy is primarily service- and agriculture-based, with the agriculture industry employing one third of the workforce.6 Maize is a staple food crop in Uganda, and over 90% of it is produced by smallholder farmers.7 Uganda’s main exports are concentrated in coffee, fish and fish products, tea, cotton, flowers, horticultural products, and gold.6 Conversely, the country’s main imports are focused in capital equipment, vehicles, petroleum, medical supplies, and cereals.6

Uganda meetsScipion’s country standards for its performance across relevant growth, stability, and access metrics.8 As the eleventh largest economy in Sub-Saharan Africa with a GDP of $25.5 billion, the country benefitted from an estimated $44.4 billion in net foreign direct investment that flowed into the Sub-Saharan region in 2015. 9 Sub-Saharan Africa had regional GDP growth of 1.3% in 2016, and is projected to strengthen to 3.5% by 2019.10

Additional Sustainability and Impact Highlights

  • The company’s staff, local farmers, village agents, and external organizations are trained on agronomic topics including land management and preparation, seed selection and responsible herbicide/fertilizer use, post-harvest handling and storage, Good Agricultural Practices standards, grain quality analysis and management, farm business planning, and marketing procedures.
  • The financial services available to farmers include loans for in-kind products, such as agricultural inputs, in addition to loans for working capital. All loans are offered through a local bank partnership. The local bank utilizes the company’s ability to track the smallholder farmer’s output performance over several seasons to determine the farmer’s ability to repay their loan, allowing the bank to offer services to farmers at a much lower rate than commercially available.
  • The company was approved by the National Environment Management Authority for its completed environmental impact assessment, ensuring compliance with national environmental and social standards around waste management, occupational health and safety, and community concerns.

1) The Investment Highlights section reflects the terms of the facility as of February 28, 2017.  2) The facility amount represents the current amount that is available to the borrower under the agreement. This amount may change over time.  3) This metric is not a measure of TriLinc’s investment performance nor is it necessarily indicative of distributions which TriLinc may provide to investors.  4) The collateral coverage ratio is the amount of collateral the borrower must maintain in relation to the total amount outstanding on the facility.  5) The World Bank, World Development Indicators Database, Uganda, 2017.   6) CIA, The World Factbook, 2017: Uganda.  7) Yield Gap: Uganda.  8) There is no assurance that our investment in this company or this market will be successful.  9) The World Bank, Data, Sub-Saharan Africa, 2016.  10) The World Bank, Global Economic Prospects, June 2017.

Investment Overview

Scipion has structured and provided financing to an SME Financier, founded in 1995, that has a growing footprint across South Africa, Botswana, Swaziland and Zambia.  SME growth and development is core to economic development in Africa, and the company utilizes its Business Credit services to address the growing demand for small and medium size enterprise (“SME”) funding in Sub-Saharan Africa.  The company provides training-tied financing to SMEs across a variety of business sectors that comply with the IFC and European Development Finance Institution exclusion lists. Historically, 93% of SMEs that the company supports had not been able to access formal nor informal credit and 71% of the SME portfolio is owned by Black female vendors. The company’s business model supports its SME clients in securing purchase orders with large corporate businesses,

encouraging these larger businesses to incorporate SMEs into their supply chain and supporting local economic and social development. By sourcing from historically disadvantaged suppliers, such as exempted micro enterprises, qualifying small enterprises, and Black owned and Black women owned vendors, these large corporate businesses are able to improve their Broad Based Black Economic Empowerment scorecard, which provides financial incentives for the company and supports sustainable, equitable development. Alongside financing, the company provides governance, cash flow management, and procurement training and support to its SME clients with the aim of making these businesses more attractive to commercial banks for future financing.

Scipion’s financing will support the expansion of the company’s Business Credit services line, allowing them to finance more SMEs and increasing the opportunity for local SMEs to participate in formal supply chains.

Investment Highlights1

Investment TypeSenior Secured Trade Finance

StructureRevolving Facility with a 4yr Term
Facility Amount2$10,000,000

Interest Rate3Twelve Month Libor +10.00%

SectorMicro Finance

Cash Flow Coverage Ratio4≥1.44x
Impact Objective(s)
Access to Financial Services; Job Creation; Equality & Empowerment; Capacity Building.

Market Overview

South Africa is classified as an upper-middle income country by the World Bank.1 South Africa is distinguished as the only African member of the G20, an international council for the major economies’ finance ministers and central bank governors to discuss financial and monetary policies, with the goal of promoting world economic development.2 Between 2011 and 2015, annual GDP growth rates averaged approximately 2.14%.1  South Africa’s main exports have traditionally been concentrated in gold, diamonds, platinum, other metals and minerals, and machinery and equipment.3 Conversely, the country’s main imports have been focused in machinery and equipment, chemicals, petroleum products, scientific instruments, and footstuffs.3

South Africa meets Scipion’s country standards for its performance across relevant growth, stability, and access metrics.4 In 2015, it ranked fourth across the Sub-Saharan African region on the World Bank’s Ease of Doing Business index.5 As the second largest economy in Sub-Saharan Africa,6 the country benefitted from the roughly $41 billion in net foreign direct investment that was estimated to have flowed into the region in 2015.7 Sub-Saharan Africa had aggregate estimated GDP growth of 3.0% in 2015.7 Looking ahead, overall regional GDP growth is projected to strengthen to 4.4% by 2018.8 flowed into the Sub-Saharan region in 2015. 9 Sub-Saharan Africa had regional GDP growth of 1.3% in 2016, and is projected to strengthen to 3.5% by 2019.10

Additional Sustainability and Impact Highlights

  • The company offers its employees an extensive group life insurance policy that covers employees in the event of a critical illness diagnosis, temporary and permanent disability, and death.
  • The company will launch a new stock incentive scheme and pension fund for its employees in 2018.
  • A Social and Ethics Committee oversees various policies and procedures that include gender discrimination, sexual harassment, and HIV/AIDS policies.
  • Employees are provided with skills development, product training, and compliance training on a regular basis and many employees are required by regulation to stay up to date with the latest legislation.

1) The Investment Highlights section reflects the terms of the facility as of September 30, 2017. 2) The facility amount represents the current amount that is available to the borrower under the agreement. This amount may change over time. 3) This metric is not a measure of Scipions investment performance. 4) The collateral coverage ratio is the amount of collateral the borrower must maintain in relation to the total amount outstanding on the facility. 5) The World Bank, World Development Indicators Database, Uganda, 2017. 6) CIA, The World Factbook, 2017: Uganda. 7) Yield Gap: Uganda. 8) There is no assurance that our investment in this company or this market will be successful. 9) The World Bank, Data, Sub-Saharan Africa, 2016. 10) The World Bank, Global Economic Prospects, June 2017.