Citi Client Casebook Middle East and Africa 2022

Environmental, Social and Governance (ESG) 6 The Challenge Fast Moving Consumer Goods (FMCG) companies that operate in Africa distribute their products across the continent via small and micro-retailers (mom and pop shops). These small retail businesses are essential for the growth of the African economy. However the true challenge for Micro, Small and Medium size Enterprises (MSMEs), is lack of access to affordable financing required for working capital, productivity and growth. In addition to this the COVID-19 pandemic further impacted micro and small business operations in developing markets resulting in major decline in demand and sales further exacerbating their working capital challenges. 4G Capital sought financing from Citi to further scale and grow their digital financial services in Kenya to support micro-retailers to purchase stock and make quick payments to improve their working capital metrics and consistency of income. The Solution Citi Social Finance, Citi Export Agency Finance, the U.S. International Development Finance Corporation and the Ford Foundation in 2019 launched Scaling Enterprise, a $100 million loan guarantee facility, which will enable Citi to provide early-stage financing in local currency to companies that expand access to products and services for low-income communities in emerging markets. Citibank NA (Kenya) provided a Kenya shilling equivalent USD 3MM Term loan facility to 4G Capital under the Scaling Enterprises structure. As part of this financing structure 4G Capital and Citi launched a partnership in 2020 for last mile financing. This collaboration aims at addressing the inventory finance needs of last-mile distributors of fast-moving consumer goods (FMCGs). 4G Capital will support Citi’s FMCG customers with its Kuza product which uses the company’s proprietary fintech to ‘plug and play’ with partner systems allowing businesses to buy on credit, rather than paying cash on delivery. This also allows shop owners to maintain minimum stock levels for continuous operation and increase order sizes, boosting their annual revenue. The Results The success of this deal brings more hope to SMEs that are unable to access affordable bank financing. The transaction also came at a time when the country and small businesses were struggling with the adverse effects of COVID-19 and this facility will go a long way in supporting 4G Capital to scale their reach to the many SMEs that needed financing at this time. The financing structure by 4G Capital is expected to impact more than 25,000 micro-enterprises providing them with the necessary liquidity and working capital to keep their businesses afloat and especially given the heightened costs that result from shocks like COVID-19. 4G Capital Citi Social Finance Solution enables scale and growth for 4G Capital’s Digital Financial Services 4G Capital is a digital disruptor in the Kenyan micro, small and medium enterprise sector, using fintech to power business growth to build economies and generational success. 4G Capital uses a high touch, high tech model to provide clients with financial services, training and digital solutions, including working capital loans to small businesses. The credit decision making is digitized with disbursements and repayments via mobile money, enabling timely credit for traders and enterprises.