Publish What You Fund’s DFI Transparency Initiative has benefitted from the input of experts from development finance institutions (DFIs) themselves, from civil society organisations, and from private sector investors. Our Project Advisory Board, which provides strategic guidance for the initiative, has also enabled us to draw on the expertise and advice of sector leaders who bring hands on experience as well as diverse perspectives. Aubrey Hruby has been on the Project Advisory Board since the initiative’s inception and brings a wealth of experience of helping investors understand and enter African capital markets.

Aubrey shared her perspective on how better transparency can drive more equitable access to development finance when she sat down with our CEO, Gary Forster.

GF: Aubrey, please introduce yourself for our readers.

AH: Sure, so I’ve been working in the African Markets advisory business for 18 years, helping investors with deal origination, partner identification, stakeholder engagement and market entry strategies, and helping African entities raise capital in the US and Europe in the venture capital, private equity and infrastructure sectors. I’m currently a Senior Fellow at the Africa Centre at the Atlantic Council and I’m delighted to be here speaking with you today. Before we get started though I should say that as much of my experience relates to private equity and funds, I’ll probably be focussing more on those than the direct investments made by DFIs, which I know your work also covers.

GF: Aubrey, what’s your perspective on the role of DFIs in Africa, where you’ve worked the most?

AH: Firstly, I should say how critical DFIs are for the African private equity sector. None of the funds we see today would exist if it weren’t for the DFIs and they continue to play a very important, central role with early and scaling funds. DFIs are perfectly placed to take on the risk associated with first time fund managers. Of course there are questions to be asked when DFIs are funding the same fund for many years through many iterations rather than using their capital to support new funds. So while we’ve seen relatively little “graduation” – funds moving from being DFI funded to being privately funded – the success of the African fund industry is in large part a result of the presence and support of the DFIs.

If we want access to capital to be democratised we need transparency from DFIs. We need to know what they are doing, where, how the deals are structured and what impact is being made.

GF: What’s your experience of dealing with DFIs directly, and to what extent does transparency, or lack of transparency, become an issue?

AH: If we want access to capital to be democratised we need transparency from DFIs. We need to know what they are doing, where, how the deals are structured and what impact is being made. And of course this is very much the focus of the DFI Transparency Initiative. But the point I want to get across is that this transparency starts earlier in the process and that more transparency can make raising funds, by first time fund managers, far simpler. If you want an inclusive capital space, where we see women-owned, locally owned, institutions run by people of colour, benefitting from DFI support, then we need more first time fund managers, not the same cohort of traditional fund managers with the networks and CVs that we currently see. Raising funds is expensive, it takes a long time, many years in fact. And there is no guarantee you’ll succeed – so who wants to take on that risk? It doesn’t have to be this way, you shouldn’t have to fly to see 30 DFIs, all with their own unique processes and forms to complete or pay to attend the conferences to have 18 of the same meetings in a row. All of these barriers limit access to DFI funding. If we want an inclusive approach to developing new fund managers we have to reduce this cost, and this risk of fundraising, or else we’ll only be attracting those individuals with the money to overcome these barriers. 

GF: You’ve got a lot of hands on experience so I sense you have a clear understanding of what you’d like to see change?

AH: Again, transparency across the breadth of DFI operations is important, we should know how their deals are working and what impact they are making. But for existing or new fund managers it’s really about the process for applying to funds. And here I think the solutions are relatively simple. Why can’t we do group pitches to DFIs? Why can’t we use standard forms like when you apply for university in the United States? Why can’t DFIs describe their fundraising approaches on their websites detailing their fund of fund decision making processes–the expected ticket sizes, the time frames for consideration, the sectors or regions they are targeting, whether they’ll fund new funds or not, and whether they’ll fund single country funds? Finding out all this stuff takes time and money, and connections. And if you’re new, or from a background that isn’t the traditional background, like I say funds owned by women or people of colour, then you just might not have the time, money or connections in the first place. If DFIs were oriented to be inclusive, and were focussed on creating diversity within their cohort of investees, we’d see much clearer communication of forward looking information about what DFIs are looking to fund, how interested parties should engage with them, what’s eligible and what’s not.

More transparency can make raising funds, by first time fund managers, far simpler. If you want an inclusive capital space, where we see women-owned, locally owned, institutions run by people of colour, benefitting from DFI support, then we need more first time fund managers, not the same cohort of traditional fund managers with the networks and CVs that we currently see.

GF: Thank you, this is a perspective that we’ve not really heard from our other stakeholders. Any closing remarks?

AH: I can sometimes be a bit controversial but I really think we need to shake things up if we want to change the nature of the investees we’re supporting, and we want to be truly inclusive. Take the current initiatives such as the 2X Challenge which are aiming to channel more funds towards gender programming across an increasing number of DFIs. Why do we need a separate program? Why don’t the participating DFIs just announce that after Dec 2022 they will no longer invest in funds or projects that do not have gender diversity at the C suite level? When that clear message is sent out to the market we’ll know DFIs are serious about gender equality and we will see more women elevated to capital allocating senior roles.

So look, to finish up, DFIs are extremely important for the development finance space in Africa, and for that reason they need to be transparent about the fund of fund investing process to drive change in a way that is responsible and inclusive, and be true to their mission of supporting first time fund managers.