Original source: DFC
U.S. International Development Finance Corporation (DFC) has signed a $14.75 million loan portfolio guaranty with Stichting Cordaid and its impact investment firm, Cordaid Investment Management, to support lending to small and medium enterprises in West Africa and the Sahel to help foster stability and economic growth.
DFC provided the guaranty alongside $2 million in first loss grant capital from the U.S. Agency for International Development’s West Africa Trade and Investment Hub through DFC’s new Mission Transaction Unit, which works with local USAID missions to support investment in developing markets.
“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 guaranty to Cordaid, an organization working to end poverty in fragile and conflict-affected countries, will support lending to small and medium enterprises and microfinance institutions in Burkina Faso, Guinea, Mali, and Sierra Leone. Cordaid expects to lend at least $37 million to 50 small and medium enterprises and eight microfinance institutions by 2025, supporting at least 2,100 new jobs and 8,000 microentrepreneurs.
“We are very grateful for the support given by DFC,” said Cordaid Investment Management Managing Director Hann Verheijen. “The portfolio guarantee is pivotal in our ambition to deploy growth capital to SMEs in the most underserved economies. DFC’s instruments will enable us to raise additional private capital from likeminded impact investors.”
Many West African countries, particularly Sahelian countries bordering the Sahara Desert, are struggling against high rates of poverty, unemployment, conflict, and desertification. Small and medium enterprises are particularly hard hit by a lack of long-term financing and women-led businesses face the additional challenge of limited access to financing as well as business training and market information.
The project advances DFC’s 2X Women’s Initiative, with at least 30 percent of lending slated to support businesses that are owned by or led by women, or which offer a product or service that delivers tangible benefits to women. The guaranty also advances DFC’s commitment to focus investments in low and lower-middle income countries and in fragile states.
“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 Chief of Party of the USAID West Africa Trade and Investment Hub Michael Clements.