This investment will be put into African banks, insurance companies, and payment companies as a way to "tap into rising demand among low-income consumers".
Overseas Private Investment Corp. (OPIC), an American development financing division of the US government, approved a $200 million investment in Leapfrog's latest fund. The OPIC investment is part of their wider mission to fund projects in developing countries.
"We’re looking at payment companies because it’s becoming a popular tool that just offers much cheaper ways of doing business," said Karima Olokun-Ola of LeapFrog Investments.
LeapFrog's latest venture into the African financial services sector is driven in part by the realization that the continent's financial services market is underserved, Olokun-Ola explains.
With headquarters in Mauritius and backing from the Soros Economic Development Fund, Leapfrog already has a presence in the continent's financial ecosystem, having raised over $400 million in 2014 in 'socially responsible ventures' that include Africa Finance Business Mauritius, Resolution Insurance in Kenya, and other operations in Ghana and Zambia.
"We are speaking to insurance companies, ones that are looking for capital and those ones with sufficient capital but are looking to take advantage of consolidation and grow market share (in Kenya)."Karima Olokun-Ola, LeapFrog Investments
One-third of the new fund will be invested in healthcare delivery and health insurance, Olokun-Ola said, adding that it represents the next step for financial services - helping Africans in low-income households get affordable medical care.
It should be interesting to observe how LeapFrog's $800 million war chest will assist them to navigate the different financial regulations in different African countries. The investment is unlikely to disrupt existing financial service industries, but it is likely to bring out opportunities that others may not have seen, as is the case in Kenya where insurance companies are now required to hold more cash due to an increase in capital requirements.
LeapFrog is interested in investing in payments companies and startups, and given most are in their early stages (except a few like Safaricom's M-Pesa), this investment could give them the impetus to grow and gain exposure to different African markets.
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