Upon walking into Miarakap’s offices in Madagascar’s capital of Antananarivo, we were invited into a coffee tasting featuring beans cultivated across the island. Entrepreneurs spoke of the merits of Madagascar-grown beans versus those grown elsewhere and the positive impact that this industry could have on farmers. Sipping the balanced brew, it was impossible not to feel a jolt of both caffeine and hope.
Miarakap is the only significant, local private impact investor in Madagascar. It supports talented and responsible entrepreneurs with patient and demanding capital and advisory services. Founded in 2018, the fund is backed by various investors including Madagascar’s three largest banks, ten of the nation’s largest corporates, several impact financial institutions, and local families. Miarakap manages $20 million USD and relies on a team of 40 financing and coaching professionals to carry out its missions.
Since founding, Miarakap has developed three complementary lines of business in order to be a one-stop-shop for impact-oriented entrepreneurs:
Capital investment and support for SMEs
Management of financing, support, and promotion programs for entrepreneurs
Consulting with development actors to design and implement entrepreneurship support programs
To date, Miarakap has financed, through a split of equity and debt, 15 companies and deployed ~10 billion ariary (~$2.2 million) with ticket sizes ranging from $150k to $500k. Through other blended finance tools, Miarakap has financed an additional 40 entrepreneurs. Miarakap’s efforts have helped create / maintain 2,000 formal jobs. We spoke with founder and CEO Emmanuel Cotsoyannis about top-of-mind issues and opportunities for Miarakap.
What investment themes are you focused on at Miarakap?
Fund I is sector agnostic with a focus on companies creating formal jobs and adding value to local communities. This includes companies involved in education, digital transformation, agricultural transformation, micro finance, retail, and access to energy.
Going forward, we are excited about SMEs with high environmental impact potential. We have identified four core themes for this future focus:
Essential services for vulnerable communities (water, energy, education, finance)
Sustainable use of natural resources (mainly agribusinesses)
Nature based solutions
Climate change mitigation (renewable energy, agroforestry, waste management, etc.)
What other key themes do you see creating investment opportunities in Madagascar?
At Miarakap, investment themes we are interested in must contain both return and impact potential. Areas we are excited about now include:
Renewable energy – Less than ~15% of the population has access to energy. We think solar, hydro, and mixed projects have potential here.
Food – Madagascar has one of the lowest protein consumption rates in the world. We see opportunity to increase protein consumption in the population by exploring different protein sources. We have invested in 2 insect protein businesses to date.
Sea-Based Industries – Madagascar has over 5,000 km of coastline. We see opportunity in fishing (shrimp, crab, seaweed), aqua culture, etc.
Tourism – This is the biggest opportunity, but it is at the receiving end of the chain of many constraints. Roads, international flights, and security on the ground are all issues that are hard to control. We do find success in this space – for example our investment in tourism / hotel business school Vatel is going well.
Private Education – Madagascar faces a quality and quantity problem regarding education. Human capital is also the biggest road block for development in Madagascar. We see this as an important focus area.
Export Businesses – There is opportunity here related to more niche products including essential oils, grains, fine cacao, and lychee.
Any investment success stories in your portfolio you would like to highlight?
Despite having invested in Vatel Madagascar, a hotel and tourism business school, nine months before the start of COVID, this business has performed very well. Vatel was able to increase its offerings and geographic footprint throughout the country. The company has also improved both its financial and impact results. During our investment period, Vatel’s turnover has increased by ~3 times.
HaiRun Technology, a digital services company specializing in software development for export, has also seen strong growth. Since investment, HaiRun has expanded from 20 employees and $300,000 turnover to 150 employees and $2 million turnover. It is a leading player in a growing industry.
Miarakap was also an early investor in EXA, a company developing alternative proteins from insect breeding. EXA has raised $2 million in additional funding to scale and is building a new factory.
What type of investor do you think Madagascar makes sense for? Why should foreign investors commit capital to Madagascar?
Madagascar is a blue ocean (less competitive and contested market) for investors as doing business here is not that easy yet numerous business opportunities exist. The challenging business environment is a key reason there is a lack of private funding.
This generates opportunity for an experienced fund like Miarakap, especially given our blended finance approach. In Madagascar, we have the ability to mobilize international public funding to help derisk investments.
Given the unique market dynamics in the country, foreign investors should enter the market with a knowledgeable local partner. Miarakap is very motivated to help international investors develop their presence here.
As noted, Madagascar is a very challenging business environment. How do you mitigate some of this risk?
Working with the best entrepreneurs
Mobilizing the strong ecosystem which now exists
Blended finance
How do you source deals in a market as nascent as Madagascar’s?
Miarakap has built a very effective ecosystem which includes 25 active investors and numerous partnerships with institutions and individuals that are interested in supporting entrepreneurs. Miarakap also relies on word of mouth, heavy social media communication, and legwork in the field. Since its founding six years ago, Miarakap has met with 600+ entrepreneurs.
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