The Aga Khan Fund for Economic Development (AKFED) is an international development agency dedicated to promoting entrepreneurship and building economically sound enterprises in the developing world. AKFED focuses on building enterprises in parts of the world that lack sufficient foreign direct investment. It also makes bold but calculated investments in situations that are fragile and complex.

AKFED operates as a network of affiliates with more than 90 separate project companies employing over 30,000 people, with annual revenues in excess of US$1.5 billion. The Fund is active in 16 countries in the developing world: Afghanistan, Bangladesh, Burkina Faso, the Democratic Republic of the Congo, India, Ivory Coast, Kenya, Kyrgyz Republic, Mali, Mozambique, Pakistan, Senegal, Syria, Tajikistan, Tanzania and Uganda.

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Overview of the Aga Khan Fund for Economic Development

For more than 50 years, AKFED has made investments and operated companies in the developing nations of Africa, South Asia and Central Asia. AKFED seeks to create profitable, sustainable enterprises through long-term investments that result in strong equity positions. This in turn allows AKFED to take a “hands-on” approach by providing managerial and technical expertise. Profits generated by the Fund are reinvested in other economic development initiatives under the AKFED umbrella.

AKFED often works in collaboration with local and international development partners to create and operate companies that provide goods and services essential to economic development. These range from banking to electric power, agricultural processing, hotels, airlines and telecommunications. AKFED also works with governments to help promote the creation of enabling legal and fiscal structures that encourage the growth of the private sector.

At the invitation of several governments, AKFED has helped critical industries to make the transition to market economies through the privatisation process. These include industries such as banking, power generation, tourism, manufacturing and the agricultural sector, in countries as varied as Uganda, Tajikistan, Pakistan and Afghanistan. AKFED’s approach emphasises the development of local human resources over time, including managerial, technical, marketing and financial skills. Other characteristics of this approach include providing essential seed capital to launch projects in those sectors and countries where attracting investment is difficult. AKFED takes a long-term view in order to build viable, self-sustaining and profitable companies. It also participates in the management of companies in which it invests with the aim of preparing companies for broader ownership by local interests.

Financial Services

To encourage the creation of strong and efficient capital markets, AKFED provides an institutional umbrella for banks, insurance groups, and property owning and management companies in eastern Africa, Central Asia and South Asia.

AKFED’s investments include a controlling interest in Habib Bank Limited (HBL), Pakistan’s largest private bank (acquired through a government privatisation programme in 2004) and the Development Credit Bank Limited (DCB) in India. AKFED is also the founder and lead shareholder in the Kyrgyz Investment and Credit Bank (KICB), which focuses on the corporate sector and on medium and long-term finance that will contribute to the growth of the banking industry and stimulate entrepreneurial activity. In Bangladesh, AKFED is the majority owner of a leading provider of corporate finance and lending services to major businesses and projects.

Its holdings in East Africa include the Diamond Trust Bank, which was founded in the 1930s in Kenya to help recycle local savings into loans for home building and small businesses. It now offers a range of retail banking products. The Jubilee Insurance Group provides insurance across the region. In Pakistan, New Jubilee Insurance and New Jubilee Life offer a range of products.

Tourism Development

AKFED’s Tourism Promotion Services (TPS) seeks to develop tourism potential in selected areas in the developing world, particularly in under-served regions. It builds, rehabilitates and manages hotels and lodges that contribute to economic growth and the overall investment climate in an environmentally and culturally sensitive manner.

AKFED owns and manages properties in Afghanistan, Kenya, Mozambique, Pakistan, Tajikistan, Tanzania and Uganda, operating under the brand name Serena. Serena hotels and lodges contribute to the local economy through the training of skilled manpower, the reinvigoration of artisans and craft industries, and through sensitive conservation or development of the surrounding area. This includes placing priority on the hiring and training of local residents for employment at all levels of the organisation.

TPS often seeks to develop properties in less-travelled areas that require accommodation of an international standard -- accommodation that supports tourism and business development -- but which often are ignored by commercial hotel chains.

At each hotel, the policy is to minimise the impact on the local environment while seeking to maximise socio-economic benefits to the local economy. In Tanzania, for example, prior to the creation of new facilities in the country’s national parks, four environmental impact studies were carried out. The Serena Hotel in Mombasa maintains a sanctuary for indigenous butterflies and also works actively with local residents on a programme to protect sea turtle nesting sites. These measures have earned the Serena hotels numerous environmental awards.

Industrial Promotion Services

Industry and Infrastructure

AKFED works with governments, international corporations, international financial institutions and donors to create solutions to pressing industrial and infrastructure needs. AKFED has invested in, and manages, over 50 industrial project companies in Africa and Asia.

In the early 1960s, a group of companies was set up under the corporate name Industrial Promotion Services (IPS). Each company was created to provide venture capital, technical assistance and management support to encourage and expand private enterprise in countries of sub-Saharan Africa and South Asia. Growth, privatisation and a re-orientation away from import substitution and towards export promotion resulted in adjustments to IPS’ approach. Expansion into areas such as agribusiness, packaging and infrastructure in sub-Saharan Africa were accompanied by the need for new investments in the emerging economies of Central Asia in the 1990s and 2000s, in particular, in Tajikistan and Afghanistan. Today, IPS companies play a vital role in local and regional economies.

Food and Agro-Processing

One of IPS’ core operational sectors, agro-processing, includes companies that supply goods for both local and export markets. They also play a significant role in supporting the rural economy. In Kenya, for example, Frigoken provides agricultural extension services to 35,000 Kenyan bean farmers. The beans are processed and exported to European markets. Loans are provided to the farmers by the non-profit Aga Khan Agency for Microfinance to assist them with financial needs that arise prior to receiving harvest revenues.

In West Africa, AKFED supplies agricultural extension services to more than 60,000 cotton farmers, operates cotton ginneries and exports finished products. Its social programmes offer microfinance, education, health and access to water to the farmers.

In addition to promoting the employment of women, these companies have become national role models in matters of employee welfare, including the provision of child care and health care.

Infrastructure

AKFED works with governments, international corporations, international financial institutions and donors to create solutions to pressing infrastructure needs, including power generation, telecommunications and water supply services. AKFED’s first investment in the power sector, the US$225 million Azito Energy project in the Ivory Coast, was the largest private sector power plant in sub-Saharan Africa. It was followed by the Tsavo Power plant in Mombasa, Kenya’s first privately financed “open-bid” project and the first such plant successfully constructed under an updated and more stringent environmental law.

AKFED is also working with partners to modernise and expand a Soviet-era hydroelectric power plant, thereby boosting the eastern province of Tajikistan’s inadequate electricity supply, reducing deforestation and contributing to the region’s economic recovery. In Uganda, AKFED is leading the US$ 860-million, 220-megawatt Bujagali Hydro Power Project, to produce critically needed electricity for the country, and for neighbouring Kenya.

AKFED’s initial involvement in building telecommunications infrastructure was in Indigo, a GSM mobile phone operation in Tajikistan. In Afghanistan, AKFED determined that building communication infrastructure was critically important to the redevelopment of the country and was awarded the country’s second GSM mobile phone license. The company that was formed, Roshan, has invested over US$ 250 million in expanding its coverage. It is now the market leader with over 1.3 million subscribers. Roshan directly employs 900 people, making it one of the largest private sector employers in the country. Indirectly, nearly 20,000 people are employed through distributors, contractors and suppliers.

Media Services

The Nation Media Group, founded by the Aga Khan in 1960, has its origins in Kenya’s Taifa and Nation newspapers, which were set up to provide independent voices during the years just preceding the country’s independence. Majority owned and run by Kenyans, the Nation Media Group’s operations include a growing number of English and Kiswahili national newspapers, a regional weekly, and radio and television stations. In recent years, the Group has expanded its operations into Uganda and Tanzania.

Aviation Services

The aim of the Aviation division is to assist in maintaining the critical aviation infrastructure in support of economic development. The division provides investment, management and operational expertise and training. AKFED has taken a majority stake in Air Burkina, as part of a government privatisation plan designed to ensure the long-term viability of the airline. In 2005, AKFED launched an airline in Mali to increase capacity in West Africa.