LeapFrog Investments: “Ghana is ripe for the development of a savings culture”

Platform Africa recently spoke to Doug Lacey, a Partner at LeapFrog Investments, a specialist investor in emerging markets financial services, for an exclusive interview. He leads the value creation initiatives for portfolio companies, helping LeapFrog’s companies to fast-track growth, innovate and drive efficiency in the emerging consumer segment. He was recently in Mauritius, as a speaker for the First Pensions and Alternative Investments Conference.

How has Leap Frog Investments been able to open up capital markets to steer growth for business?

Across Africa and Asia, some two billion low-income emerging consumers are rapidly joining the global economy. The emergent consumer is seeking access to the tools and services required to rise into the middle class sustainably.

 At LeapFrog, we invest in innovative companies that are seeking to deliver these essential services at scale, including health, pensions, insurance, and financial services. We typically invest between $10m and $50m, and actively deploy our knowledge, skills, and experience to help companies grow.

 Our approach is called profit with purpose. We seek to help scale the profitability of these companies with a financial goal of achieving private equity style returns on exit, while at the same time delivering against clearly define and impactful social metrics, ensuring LeapFrog and its partner companies are focused on sustainably supporting the rise of consumers in emerging markets.

Based on your African experience, to what extent have companies been successful in micro-insurance and in driving innovation and efficiency?
The scale and reach of mobile and technologies such as big data is enabling the emergence of companies achieving unprecedented innovation and efficiency. Our partner company BIMA Mobile is a fantastic example of this. BIMA connects insurers and mobile phone operators to offer affordable insurance to low-income populations. Insurance is an essential safety net for those making their way out of poverty.

 It solves the problem of insurers, who previously struggled to reach this demographic, providing an efficient distribution channel with which to do so. On the flipside, there are also benefits for the mobile operator. BIMA’s value-add services to customer reduce operator churn rates. In just over 5 years, BIMA has grown to reach almost 30 million subscribers and is growing at 500,000 customers a month.

Ninety-seven percent of BIMA customers earn below $10 a day, demonstrating the demand for such services in emerging markets. Recently, LeapFrog worked with BIMA to support the development of a low-cost, 70 cents a month hospital cash plan insurance policy in Ghana.

What are the main African countries who are ahead of the curve in deriving value additions in the pension portfolio?
Ghana is a good example of a country ripe for the development of a savings culture. Ghana’s recently liberalised pensions industry is rapidly expanding, and its retirement industry is set to grow by 400% in the four years leading up to 2018.

Our partner company Petra is working to ensure that every Ghanaian can achieve their ambitions through saving. As the first pensions trustee approved and licensed by Ghana’s National Pensions Regulatory Authority, Petra provides long-term savings, loans, and mortgages that offer financial security to thousands of Ghanaians investing in pensions for the first time.

In just five years, Petra has grown to become the largest independent pensions trustee in Ghana, and one of the two largest by assets under management per the latest Ghana’s National Pensions Regulatory Authority’s ranking for the year 2015.

In a recent survey of 1,200 Ghanaian workers, Petra reported 55% were interested in long-term savings products and would be willing to contribute US$171 annually on average. 53% of respondents also said pension planning must start from the age of 20.  These insights helped inform Petra’s “Savings Booster”, an investment product that encourages long-term savings by allowing employed workers to save on top of their mandated pension scheme.How does strategy with a purpose work for companies on the continent?

LeapFrog’s companies are rapidly deepening access to financial services and healthcare across the continent. LeapFrog uses its proprietary measurement framework, FIIRM (Financial, Impact, Innovation and Risk Management) to operationalise Profit with Purpose investing at the company-level. FIIRM enables companies to clearly define impact, to set
KPIs for financial, social and governance goals, and to drive performance.

The number of emerging consumers reached across LeapFrog’s Africa portfolio has increased 340% on average since LeapFrog invested, and the number of jobs supported across the continent has grown 100% since investment – true profit with purpose in action.

Doug Lacey has over 30 years executive experience in insurance, building and growing businesses in emerging markets. He is the former Divisional Chief Executive at African Life, responsible for operations of insurers in South Africa, Botswana, Kenya, Zambia, Tanzania, and Ghana. In South Africa, Doug oversaw the growth of one of the largest micro-insurance operations in existence, with 1.6 million beneficiaries. Previously, he was COO of Swiss Re Life and Health Southern Africa. He has served on many boards across multiple African countries and has played a pivotal role in enhancing corporate governance. He holds an MBA and is a Chartered Insurer (FCII). 

LeapFrog Investments is a specialist investor in emerging markets financial services, seizing the growth opportunity presented by two billion emerging consumers in Africa and Asia. LeapFrog’s portfolio companies currently provide insurance, savings and pensions products which reach over 95 million people in countries such as India, Indonesia, Sri Lanka, the Philippines, Ghana, Nigeria, Kenya and South Africa. A pioneer in profit-with-purpose investment, the LeapFrog team draws on decades of operational experience to identify and help build extraordinary companies that deliver top-tier financial and social returns. LeapFrog’s distinctive investment strategy has attracted many of the world’s leading institutional investors, and the company now manages close to one billion dollars of investor assets.