MICROCAPITAL BRIEF: IFC Commits $1b to MSMEs in Africa Recovering from Pandemic Recession via Risk Sharing, Mezzanine Financing

The International Finance Corporation, a member of the World Bank Group, recently committed USD 1 billion to finance micro-, small and medium-sized enterprises (MSMEs) through risk sharing and mezzanine financing in collaboration with public and private financial institutions. The loan will target MSMEs in sectors considered more likely to create jobs, given the changes brought on by the COVID-19 pandemic. A portion of the funds also are meant to promote digital finance and agriculture to increase access to finance and reduce food insecurity. In addition to this loan, IFC committed an equal amount of funds to finance international trade in Africa with an emphasis on essential goods such as medical supplies and food.

Referring to the economic downturn caused by the pandemic, IFC Managing Director Makhtar Diop said the funding will “create the conditions for an inclusive and sustainable recovery.”

Founded in 1956, IFC offers loans, equity investments, advisory services and technical assistance to private companies with the intent of alleviating poverty and promoting open and competitive markets in developing countries. During the 12 months ending June 2020, IFC reported total disbursements of USD 26 billion, closing the year with total assets of USD 96 billion.

The World Bank Group is a multilateral organization whose goal is “to end extreme poverty and promote shared prosperity in a sustainable way.” As of 2021, it has 189 member nations. The group encompasses: (1) the International Bank for Reconstruction and Development and the International Development Association, which make up the World Bank; (2) IFC; (3) the Multilateral Investment Guarantee Agency; and (4) the International Centre for Settlement of Investment Disputes. During the 12 months ending June 2020, the World Bank Group disbursed a total of USD 54 billion.

By Teo Lin-Bianco, Research Associate

Sources and Additional Resources

IFC press release
https://pressroom.ifc.org/all/pages/PressDetail.aspx?ID=26352

IFC annual report 2020
https://www.ifc.org/wps/wcm/connect/corp_ext_content/ifc_external_corporate_site/annual+report/download

IFC homepage
https://www.ifc.org/

World Bank Group homepage
https://www.worldbank.org/

Previous MicroCapital article on IFC
https://www.microcapital.org/microcapital-brief-ifc-invests-24m-in-evolving-europe-principal-investments-fund-eepif-to-boost-sme-finance/

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