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Energise Africa

Energise Africa Products

Risks

This is a direct loan to a company (rather than lending to a financial institution) and therefore it is recommended that you are careful with the amount you invest. You must read the bond offer document provided at the Lendahand website, where a full statement of risks is presented.


General risks associated with your investment

This investment is not suitable for those who require a guaranteed income or ready access to capital.
Interest payments are not guaranteed.
It may not be possible to find a buyer for your bonds should you wish to sell them
Descriptions of possible returns are illustrative only. There are variable and uncertain factors associated with this investment
If the Company is unable to meet its debts and other liabilities, you could lose up to the whole amount held in bonds (but no more than that amount).
If the company cannot raise the capital the bond may not go ahead


Political risk factors

The companies listed for investment through Energise Africa have their main operations in Sub Saharan Africa hence investors have to consider the impact of changes in the political climate in the countries in which the Bond Issuers are operating.

Elections often have a strong impact on the economic stability of a country and significant changes could create issues for foreign investors especially as new regimes might close the door or making repatriation of funds difficult/impossible. Political instability could have a very strong impact on economic stability, the judicial system, stability of the financial markets and institutions, and other similar factors. Such risks are difficult to assess but could have a detrimental effect on investment returns. Corruption in many emerging markets, may be more prevalent than in developed markets. In some cases, it’s rooted in cultural differences and thus strongly influential in people’s way of life. Corruption could affect a business’s ability to present fair financial statements. It may add costs that are hard to predict or manage. It could make doing business difficult and make contracts void in court.

Due to political regime change and/or other economic factors, emerging market countries may present a higher potential for the outbreak of conflict or other types of social instability. The displacement of local populations as a result of war or unrest may affect their ability to repay loans to Bond Issuers.


Natural disaster risks

Natural disasters tend to occur more regularly and/or the effects have a more profound impact due to a lack of emergency (government) responsiveness or general infrastructure, than is the case in developed nations and can have a profound impact on local economies and communities. Investors should consider that a natural disaster (such as flood, drought or famine) may have severe impact on the ability of local people to make repayments to the Bond Issuer, which could have a knock-on impact of the Bond Issuer’s ability to make capital and/or interest payments to them.


Exchange rate risk

Bond Issuers bear the exchange rate risks. Your bond is settled in GBP, and the return of your capital and interest payments are also made in GBP. However, you should consider that the Issuer of your bond has revenue streams in local currency in the emerging market countries in which they operate. Major depreciation of this local currency against pounds sterling may have significant impact on the day-to-day operation of the Issuer and may affect their ability to repay your capital and/or interest in part or full. In recognition of this risk, Lendahand Ethex Limited has set up a small foreign exchange fund to cover potential losses to a certain extent.


Risk mitigation

Lendahand Ethex Limited has a strict set of criteria for all Bond Issuers listed on the platform. Every Issuer must also hold to our social mission and work with us to supply loans to African households as cheaply as possible. This ensures local people wishing to own and install their own solar equipment have access to affordable financing. An Issuer must also have a 'track record'; they must have proven themselves as meso-credit provider to individuals in emerging market countries. This means for instance a solid credit portfolio and enough buffers and equity to compensate for unexpected downturns. Lendahand Ethex Limited also checks the organisational structure of the Issuer and how robust their internal procedures are. Finally, the loans that an Issuer receives via Lendahand Ethex Limited must be in proportion to their total balance sheet. Where indicated on an offer, UK aid will be investing alongside the crowd and may provide first loss on their investment ahead of other investors. Where this is the case it will be clearly stated on the offer page. UK aid have also seeded a foreign exchange (FX) currency reserve that will be topped up over time (Lendahand Ethex Limited plan to set aside up to the equivalent of 1% of all repayments made from Issuers listed on the platform into this reserve fund) to cover potential losses for investors that could be caused by large changes in exchange rates.

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Why use Energise Africa?

  • Choose a project
  • Lend Money
  • Create new opportunities for African families

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https://www.ethex.org.uk/savings--investments_16.html

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