The International Finance Corporation (IFC), a global development institution and member of the World Bank Group has launched a $225 million venture capital fund to support early-stage startups in Africa, Middle East, Central Asia and Pakistan. The investment, classified into equity and ‘equity-like’ will enable tech startups to attract scalable ventures that can attract mainstream equity and debt financing.
According to a press statement seen by The Ouut, the sector-agnostic fund will work closely with other members of the World Bank to provide regulatory reforms, sector analyses and other changes that can grow the venture capital ecosystems in these regions.
#Africa’s #DigitalEconomy could reach $712 B. by 2050. Despite this potential, #startups struggle to find the #VentureCapital they need to scale. To help bridge this gap @IFC_org will invest $225 M. in tech businesses in emerging markets: https://t.co/dv36S9zZX8 #IFCVCPlatform pic.twitter.com/Hh49xQGYEf
— IFC Africa (@IFCAfrica) November 16, 2022
Its focal areas consisting of regions identified with the Global South have little access to funds. In its statistics, the statement notes that “In 2021, these regions collectively received less than 2% of $643 billion of global venture capital funding. Access to capital has been exacerbated by a slowdown in global venture capital investment, the COVID-19 pandemic, the rise in food and supply chain costs, higher interest rates, and currency depreciation. In addition, tech ecosystems are nascent or even nonexistent outside of more established markets such as Egypt, Kenya, Nigeria, Pakistan, Senegal, and South Africa.”
Owing to the potential of these regions, the IFC will secure additional capital from other development institutions and the private sector. It will also receive a $50 million fund from the Blended Finance Facility of the International Development Association’s Private Sector Window, which de-risks investments in low-income countries.
Notable startups including Twiga Foods, a Kenyan-based technology food distribution platform; TradeDepot, an e-commerce startup connecting international brands with African retailers; and Toters, a leading on-demand delivery platform in Lebanon and Iraq have benefitted from its earlier seed capital-based IFC Startup Catalyst Program aimed at contributing to the tech ecosystem.
“Support for entrepreneurship and digital transformation is essential to economic growth, job creation, and resilience. IFC’s Venture Capital Platform will help tech companies and entrepreneurs expand during a time of capital shortage, creating scalable investment opportunities and backing countries’ efforts to build transformative tech ecosystems. We want to help develop homegrown innovative solutions that are not only relevant to emerging countries but can also be exported to the rest of the world,” IFC’s Managing Director, Makhtar Diop said.