Ours is a different company
SIMA is a rebellion against the corporate financial world Michael and I grew up in: large corporate banks like Deutsche Bank - where I worked for 17 years - and credit rating agencies like Moody’s - where Michael had worked. We both felt the need for a next generation of impact investment managers that is transparent and cares about the environmental and social balance.
So we created SIMA, a company with a different culture, that is transparent and inclusive. Everybody knows how much I earn, for example. All employees can attend board meetings, not just senior people. This makes perfect sense to us because, if you want to bring people up in the company, you have to give them exposure.
Our values are transparency, entrepreneurship, innovation, logic and fairness.
Transparency brings logic and fairness. Our HR policy, for example, bans “gossip”. It is just wasted energy and we encourage direct discussion. If you have an issue with me, then you come and talk to me and we’ll solve it together. It is important to be self-critical. Each year, we talk about what isn’t going well at SIMA and share the outcomes with our people. Also, it makes no sense to discuss these things only once a year, so we follow up on a quarterly basis. Of course, we also talk about what goes well!
SIMA consists of 40 people, and except for Michael and I, we are in emerging markets spread over Kenya, Nigeria, Uganda, Zimbabwe, India and Pakistan. Being in the field allows us to create jobs locally and makes it easier to stay on top of our relationships in a cost-effective manner, even though we pay our people up to 30% more than the local average.
At Deutsche Bank, Michael and I were the first to invest in Indian microfinance, USD 250,000 in an institution called “Share Microfin”, which had 10,000 clients at the time; this grew to over 5.6 million clients. Because I am from Pakistan, we also decided to see if we could replicate the microfinance experience there, which we did and which was also extremely successful. This was quite innovative at the time.
When we started impact investing 25 years ago, I had to spend half an hour explaining what microfinance was. That has changed.
Asad Mahmood, CEO of SIMA
We wrote the first code of conduct for the microfinance industry, and Michael and I wrote the first draft of the client protection principles for the off-grid solar industry.
In 2010-2011, when nobody knew about off-grid solar, we started to invest in the sector. After that, we launched SIMA and we created the SIMA Off-Grid Solar and Financial Access Senior Debt Fund I, one of the first large funds in the off-grid solar sector, at USD 90 million. Our customers include d.light, Greenlight planet, Bboxx and other leading off-grid solar companies. We also manage the Energy Access Relief Fund (EARF), which has responded to needs in the sector and has, so far, closed 96 loans in one year - unprecedented in this industry - to energy access companies affected by covid-19. The EARF also employs a gender lens and is 2X Challenge qualified.
At the moment, with everyone chasing the bigger solar projects, we are looking at smaller, mission focused ones, and we are doing the due diligence for our upcoming Commercial and Industrial (C&I) Green Bond. We work with local solar developers and project managers and offer them working capital, inventory loans, bridges to equity, etc. We are also creating a code of conduct for them.
We are also starting with the initial work on the First Pakistan Flood Relief Microfinance Fund, as well as on an agriculture fund that we expect to launch in 2023-2024.
In many cases, the companies we invest in don’t comply with all ESG criteria, but commit to over time. We say that is OK, but that, as a condition of the loan they comply with an action plan to improve the ESG weak points and maintain a gender balance. We provide them with technical assistance and monitor their progress by means of an incremental scorecard on ESG and gender practices. For example, if there might be labour issues in the supply chain of their products. Unfortunately, what happens in China in the solar panel industry today proves that this is very pertinent, and when we see labour issues in a borrower’s supply chain, we require them to find another supplier.
The scorecard looks at ESG norms and capacities, and covers nearly 50 topics. We encourage companies that are scoring low in one area to improve their practices, and give them examples from their peers in order to show them that good ESG practices are not theoretical, but something that can be put into practice.
We try to learn from our own experiences in the area of ESG and impact and be realistic and take into account the capacities of the company in terms of human resources, systems, interactions with customers, etc. We try to prevent greenwashing and collect data to back up what we are being told, and don’t take what the borrowers tell us at face value.
Next to our investment activities, we have our advisory business, in which we arrange transcations and advise impact investors. We also advise and help companies with financial controls, unit economics (which demonstrates how much value each item—or “unit”—generates for a business), and impact frameworks.
Finally, there’s our “social businesses”.
The first one is an education finance company called Taleem Finance Company, which we helped start and funds schools in Pakistaan.
Our second social business is Asaan Ghar Finance, an affordable housing fintech company in Pakistan – although it is our ambition to expand outside the country. To me, online home financing is the next big revolution after microfinance. Countries like Kenya, with a population of about 50 million, only have 20,000 mortgages – there is a clear need.
Thirdly, we created the SIMA Impact Foundation, which provides zero-interest loans to students in India, Kenya, Pakistan or Uganda that are interested in impact investing. The Foundation provides the funding, gives them a computer, and we also provide them with practical experience through internships. These students come from low-income backgrounds, and they know first-hand the issues that impact investing is trying to solve.
We are very grateful to BIO for being an early investor, which helped us launch our first off-grid solar fund and helped establish SIMA as an impact fund manager.
BIO has invested in the Off-Grid Solar and Financial Access Senior Debt Fund of SIMA.
Asad Mahmood is the CEO and a Managing Partner of SIMA.
This is his story.
Off-Grid Solar and Financial Access Senior Debt Fund
Debt € 4,385,750.00 (2018)Asia, Sub-Saharan Africa
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