By Theresa Kef Sesay
This medium was reliably informed that in partnership with the U.S. International Development Finance Corporation (DFC), the USAID-funded West Africa Trade & Investment Hub has announced its first co-investment project with Stichting Cordaid (Cordaid), managed by Cordaid Investment Management B.V. (CIM), to increase the access to finance by small and medium sized enterprises (SMEs) and microfinance institutions (MFIs) in Burkina Faso, Guinea, Mali, and Sierra Leone.
It was further highlighted that due to this public-private partnership, the co-investment will generate 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.
“This collaboration also aims to promote two-way trade and investment between the United States and West Africa in accordance to the Prosper Africa initiative promoted by the U.S. Government,” the Release continued.
“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 for whom there is very limited access to affordable credit,” said Michael Clements, Chief of Party of the Trade Hub.
With economies in the Sahel region of West Africa among the most fragile in the world, CIM, the Trade Hub, and DFC are united in the drive to combat high rates of poverty, unemployment, conflict, and desertification through private sector investments.
SMEs are key to job creation and economic stability in the region. However, their ability to absorb the increasing numbers of people in the working-age demographic is limited without access to finance. Women-led businesses also often face unique challenges financing their businesses. 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 Cordaid, which will serve as a risk-mitigation tool and open up a pipeline of private capital managed by CIM. DFC’s $14.75 million loan portfolio guarantee provides a credit enhancement behind the Trade Hub’s grant to attract investment into CIM’s fund.
In addition to $1 million being provided by Dutch Postcode Lottery, also as a first loss grant, these sources of funding create a low-risk framework that encourages private capital to invest in conjunction with other impact investors despite the risks to investing in the Sahel region and the economic effects of the COVID-19 pandemic.
“This project will reach thousands of entrepreneurs in several fragile countries that are facing significant economic challenges, including from the impacts of the COVID-19 pandemic,” said Acting DFC Chief Executive Officer, Dev Jagadesan. “This project advances our commitment to focus on the regions where investment is needed most.”
The project aligns to DFC’s 2X Women’s Initiative, as at least 30% of CIM’s lending will be targeted at women owned/led businesses or those offering products or services that deliver tangible benefits to women. CIM has also heightened its focus on youth markets to better integrate them into local economies.
“Fragility in the Sahel is widespread and multifaceted. We do not pretend that our investments will be the silver bullet. We are certain, however, that some of our intervention will help build resiliency, as we focus on opportunities that create access to finance and job creation, while catalyzing additional investments into these most underserved economies,” said Brenda Pennell, who manages Cordaid’s portfolio in West Africa.
