Even prior to the pandemic, West Africa was viewed by potential investors as a region ripe with opportunities but associated with too much risk to bank on because of countries’ often fragile economies. In a March 16th webinar, public-private sector stakeholders and those involved in trade and development in Africa learned how Stichting Cordaid, through its investment management subsidiary Cordaid Investment Management B.V. (CIM), the USAID-funded West Africa Trade & Investment Hub (Trade Hub), and the United States International Development Finance Corporation (DFC) are working innovatively and collaboratively to combat this challenge.
During the webinar, “Trade Hub Co-Investment Launch with Cordaid Investment Management,” representatives from the Trade Hub, CIM, and DFC shared the expected outcomes of the co-investment partnership launched to increase access to finance to small and medium enterprises (SMEs) and microfinance banks operating in Burkina Faso, Guinea, Mali, and Sierra Leone. SMEs are key to job creation and economic stability in these countries. However, despite the desperate need for long-term finance to help grow and sustain these SMEs, the perception of country and market risks often deter external investors from partnering in impactful initiatives.
To counter this trend, the Trade Hub has provided a $2 million first-loss grant to CIM, which will serve as a risk-mitigation tool and open up a pipeline of private capital managed by CIM. This is complemented by a $14.75 million loan portfolio guarantee from DFC that provides a credit enhancement behind the Trade Hub’s grant to attract investment into CIM’s fund, the West African Bright Future Fund. The Dutch Postcode Lottery has also partnered with CIM to provide an additional $1 million in first-loss capital.
“We are proud to support the Cordaid project, which will provide critical capital to thousands of small and medium-sized and women-owned enterprises in fragile economies that are facing significant economic challenges exacerbated by the COVID-19 pandemic,” said Algene Sajery, DFC Vice President of the Office of External Affairs and Head of Global Gender Equity Initiatives. “This project advances our commitment to focus on our development impact, support businesses grappling with the adverse impacts of COVID-19, and target financing to regions where investment is needed most.”
Participants in the webinar gained insight on how this blended finance model creates a lower-risk framework that encourages private capital to invest in conjunction with other impact investors. The co-investment is expected to unlock up to $37 million of new private investment into these countries to support local economies, create over 20,000 direct and indirect jobs, and increase the value of exports over the duration of the activity by $30 million.
“We are enthusiastic about this partnership, which is the first of many in our grants pipeline, as we look forward to their catalytic effect on the economies of these countries by attracting private capital and providing jobs, specifically for and within SMEs struggling to survive in some of West Africa’s most fragile economies,” said Michael Clements, Chief of Party of the Trade Hub.
The webinar’s featured speakers included Matthew Anderson, Economic Growth Director for USAID/West Africa; Jim Winkler, Vice President & Director of the Economic Growth Division of Creative Associates; Hann Verheijen; Managing Director of Cordaid; and Maryam Khosharay, Deputy Vice President for the Mission Transaction Unit at DFC. A key segment of the webinar included a panelist discussion featuring representatives from USAID/West Africa, CIM, and DFC sharing insight into the technical details on the project.
For media inquiries, please contact:
About West Africa Trade & Investment Hub: The West Africa Trade & Investment Hub (Trade Hub) is a USAID-funded initiative to co-invest with the private sector to generate new private investment, create new jobs, and increase the value of regional and international exports in West Africa.
About Stichting Cordaid and Cordaid Investment Management BV: Cordaid Investment Management BV (CIM) is the asset management branch of the Netherlands-based Stichting Catholic Organization for Relief and Development Aid (Cordaid), which has been a frontrunner in opening markets to impact investment since 1997.
About USAID: The United States Agency for International Development (USAID) is the lead U.S. government agency that works to end extreme global poverty and enable resilient, democratic societies to realize their potential.
About DFC: The United States International Development Finance Corporation (DFC) is America’s development bank. DFC partners with the private sector to finance solutions to the most critical challenges facing the developing world today.