Project detail - Accial Capital Fund 1 LLC

Who is our customer

Accial Capital Fund 1 LLC (“ACF1”, “the Fund”) is a debt fund focused on providing growth capital to technology-enabled lenders active in Latin America and Southeast Asia. The fund is closed-end with an investment period covering November 2018 – December 2026 and a maturity date in December 2027. The target fund size is USD 150mln, and total assets amount to USD 76mln by 31 December 2023. The Fund is managed by Accial Capital Management (“Accial”, “the Fund Manager”), an impact-focused investor in asset-backed fintech lending portfolios in emerging markets. Per 2023 year-end, ACF1 financed the disbursement of 1.4mln loans with a volume of USD 650mln through its portfolio clients.

What is our funding objective?

FMO provides a USD 20mln (USD 10mln committed and USD 10mln uncommitted) 4-year senior unsecured loan to ACF1. FMO’s loan proceeds are directed to supporting women and youth-owned/led micro, small, and medium-sized enterprises ("MSMEs") as well as Green loans in FMO-eligible sectors and countries from Latin America and Southeast Asia.

Why do we fund this investment?

FMO’s funding will allow ACF1 to scale further its impact in the fast-growing alternative finance / digital lending sector, on-lending borrowers who are currently underserved by traditional lenders. The debt fund reaches clients that FMO cannot target directly because they are too small or require specialized knowledge. The Fund measures its performance against the SDGs and is aligned with the 2X Challenge. It specifically targets women entrepreneurs, and a significant percentage of their borrowers are young entrepreneurs due to the innovative profile of the loan originators. This group would otherwise struggle with accessing finance in the traditional financial system.

What is the Environmental and Social categorization rationale?

ACF1 has been classified with environmental and social ("E&S") Category B. The categorization considers the portfolio composition of the Fund: 62% of ACF1’s exposure is in lenders with an average loan size in their underlying portfolios between USD 10,000 and 1,000,000 (small and medium-sized enterprises or SMEs per FMO definition). The remaining 38% of the portfolio is concentrated in lenders with average loan sizes below USD 10,000, represented by consumer- and microfinance. While the ACF1 portfolio does not include high-risk activities nor bank financing with high-risk activities, there is significant exposure to SMEs, and two of the lenders in their portfolio could be E&S risk categorized as B (average loan size exceeding USD 25,000 and a tenor of over 1 year). Top exposures include 30% commerce (retail), and 32% is classified as unreported, which likely contains a high percentage of diversified commerce given the business focus of the fintech lenders. Accial manages E&S risks following its Impact Policy, which outlines an environmental, social, governance (ESG), and impact policy for the funds managed. E&S risks are assessed using responsible lending principles. Accial works with borrowers to improve ESG factors by establishing an ESG action plan when applicable.