Interview by John Njiru
John: Today I’m here with one of the sustainability and climate champions. Kindly introduce yourself and tell us about your passion in FSD Africa.
Mark: Well, thank you. My name is Mark Napier and I have a background in investment banking, but for most of my recent career has been in development finance trying to cause financial systems to change for the benefit primarily of poorer people. Recently the focus has been turning a lot towards sustainable finance and particularly green finance and we’ve been investing a lot in that area over the last few years. It’s been quite a journey from financial inclusion through capital market development and now into green finance but it’s been a very worthwhile journey.
John: What do you do at FSD Africa?
Mark: We spend a lot of time with policy makers and regulators. The main focus of the program is to create an ecosystem that allows investment to flow and so we do a lot of work around policy and regulation, building the trust of investors in financial markets. We build capacity within regulators and within financial institutions and we also use our capital to create transactions and invest in businesses that cause markets to be more competitive and more innovative and basically more accessible to a much broader group of the population.
John: How has it been 9 years at the helm of FSD Africa?
Mark: It’s been a long journey, but I think we’ve had a lot of impact over the years. We’ve brought financial services to more than five million individuals and more than three and a half million small businesses. We’ve mobilised more than one and a half billion dollars of investments and through the investing activities that we’ve done. I think we can be proud of the impact that we’ve achieved but i think more important, I think we’ve demonstrated that there is a need for a kind of market catalyst in this market. That’s what we do to try and drive change in the market. We feel that there is a useful purpose for the work that we do and there seems to be no end of opportunity really for the kind of support that we can provide.
John: You work with so many stakeholders within the industry, governments, private equity funds, and project managers. What are some of these projects you have impacted positively to the African society?
Mark: Our philosophy is very much that whether you’re talking about finance for the poor or financial inclusion; the two are linked. Whether it is capital market developments or finance or inclusive financial products they’re very closely linked and interdependent. That’s why we do a very wide range of projects. On the one hand we’ve been – for example – supported the introduction of mobile banking based basic banking products for street traders in Nigeria. That’s by building the capacity of a local bank there to be able to roll out these kinds of products. We are also working with youth entrepreneurs in Kenya’s Mathare by giving them cash transfers to see whether this will encourage them to do their businesses better.
At the other end of the spectrum we also work with the capital market regulators by building the capacity of the regulators and making it easier for them to do their work and supporting transactions, particularly increasingly now in the green space.
John: Do you think African countries are doing enough to get themselves into the green finance space?
Mark: Yes. We have been active in building green bond markets for the last four or five years. We started this in 2017 in Kenya, and then in Nigeria by putting in place investment guidelines and other regulations that allow for green bonds to to take root. That was quite pioneering and in truth I would say that progress has been quite limited. Nigeria has already done a sovereign green bond and we’re still waiting for Kenya’s sovereign green bond.
There’s has been one corporate green bond in Kenya so far. It does take a long time but I think what we’re also seeing now is that there is an increasing interest on the part of the regulators to introduce enabling regulation for green finance. There’s interest on the part of the securities exchanges to also deliver products that institutions can invest in. Institutions and retail investors that can invest in those products are green as well because there is beginning of a growing interest in green finance. So I would say Africa is on the move on green finance, but we’re at quite an early stage and I think there’s quite a long road that we need to travel.
John: Can the corporate institutions and individual market players fix this deficit?
Mark: Well, you need champions in any market. You really need champions, and these champions don’t need to be people like us. They can be champions within the regulators or within the policy makers. They can be financial institutions as well. There are some very progressive financial institutions that really believe that this is the future and that they need to invest in understanding how to develop green products that appeal to a much broader group of particularly the younger population that are very interested in green products because it’s their future.
I think a lot of educated younger people realise that this continent is the most vulnerable continent to climate change, and they would like to support in whatever small way so that they can grow up in a safe, clean, and secure place. That’s why I think it’s good for insurance companies to begin that process of trying to understand where this emerging market is coming from and what they would really like to invest in.
John: Only few African countries are responding to the climate change and the aligning investments? Is it due to lack of resources or capacity?
Mark: The countries that get it are the ones that have realised that their development trajectory needs to be funded, and they need to explore different opportunities for getting money in to be able to fund these developments. This is critical as no country would go for the green agenda if it didn’t deliver on their development needs. You need to mainstream green into your development, and when you do that you can then start to appeal to a much broader group of international investors who want to actively invest in green products.
As a country, you can issue a green bond, get that funded by very large financial institutions, then you can find ways to fund your continuing development. We are talking about a development story powered by climate. It’s not primarily a climate story and that’s a critical point to note. It’s a process of building awareness on part of those other African countries that haven’t quite worked that out yet, but they will get there. That’s part of what we’re in business to do.
John: You are quite optimistic about it.
Mark: I am very optimistic because I think there’s a real opportunity. I think oftentimes we think about the need to fund projects to protect ourselves against climate change and there’s a huge investment requirement we’re not seeing – the investment opportunity. We have recently published some research looking at the economic value of investing in green and the numbers are staggering in terms of the incremental investment that you need to put in and the net present value of that return that you get back. For the four cities that we looked in Kenya – Nairobi, Mombasa, Nakuru, and Kisumu – the incremental investment that would be required by 2050 to send those cities on a green development pathway is $27 billion. That’s a big number. But you get back from that $54 billion in value. So, why economically would you not take that route?
John: Why?
Mark: There are many reasons to that. One of them is that particular counties or cities do not have the powers to make certain decisions. Are there ways for national governments to delegate some of those decision-making and finance raising powers to to the local level as that might make things more efficient? I think a lot of the problem is to do with coordination; you know organising different ways for a city to develop requires all sorts of vested interest to be confronted, rules to be passed, creative financing structures to be raised, and that just requires a lot of effort and I think sometimes national governments don’t have the capacity or they don’t have the political will, unfortunately.
John: What do you do in your free time?
Mark: I love the program that I run, and I think we’re doing an important job, and it’s incredibly interesting. It’s a real privilege to do what I do.When I’m not doing that, I enjoy the natural environment, I run marathon, and I enjoy socialising with friends.
John: A decade at the helm of FSD Africa, what would you want to achieve further than what you’ve achieved so far?
Mark: We seem to have no end of opportunity at FSD Africa and we’ve we’ve been through some interesting times re-strategising, and I think we’re doing things that are relevant for the continent and are very important for our funders which is the UK government. We feel that there’s going to be plenty of opportunity to grow this program and achieve a lot more impact, and i think we can do that for several years more to come.
John: As we finish, kindly give us a brief history of FSD Africa.
Mark: The UK government has always been a big promoter of the idea of financial sector development, through its investment vehicle CDC. They understood the need to build regulation and capacity within financial markets so that any organisation can invest and create prosperity. They have been big backers of the idea of financial sector development over the last 20 years. Through FSD Africa they felt that the opportunity had come for a large umbrella program across Africa that was able to build capacity in many countries at the same time and achieve scale in in impact around financial sector development.
