The International Finance Corporation (IFC) has launched a new $225 million platform to strengthen venture capital ecosystems and invest in early-stage businesses addressing development challenges through technological innovations in climate, education, healthcare, agriculture, e-commerce, and other sectors. This platform will support the digital economy in Africa, Central Asia, the Middle East, and Pakistan.
In 2021, these regions collectively received less than 2% of the $643 billion in Global Venture capital funding. Access to capital has been aggravated by the slow pace of global investment in venture capital. The COVID-19 pandemic, rising interest rates, rising food supply chain costs, and currency depreciation have made it harder for businesses to access money. In addition, outside of established economies such as Egypt, Kenya, Pakistan, Nigeria, Senegal, and South Africa technology ecosystems are burgeoning or possibly non-existent.
GDP growth
The expansion possibility is massive in these regions. In Africa, for instance, the digital economy could contribute $712 billion to the continent’s GDP by 2050. In the Middle East and North Africa, technology could increase GDP by 40%, or 1.6 trillion, and generate 1.5 million job opportunities in the industry sector in the next three decades. In Pakistan digital transformation could open up to $59.7 billion in annual financial value by 2030, equivalent to nearly 19% of the country’s GDP.
Strengthening entrepreneurship and digital transformation is crucial to economic growth, job creation, and resilience, said Makhtar Diop, Managing Director, and Executive Vice President of IFC.
IFC’s venture capital platform will help technology companies and entrepreneurs scale during a period of shortage. In the capital, creating scalable investment opportunities and supporting countries’ efforts to build transformative technology ecosystems, Diop stated.
Diop added the company intends to help develop innovative homegrown solutions that are not just limited to emerging markets but can also be exported around the world.
IFC Platform
The platform seeks to support emerging venture capital markets in these regions, which have indicated early growth potential but are coping with challenging global economic conditions. The IFC will make equity or quasi-equity investments in technology start-ups and help them expand into scalable ventures that can draw equity and debt financing. IFC will also use this platform to work in partnership with other teams in the World Bank Group to build and reinforce venture capital ecosystems through regulatory reforms, sector analyses, and other tools. To help form a consortium of credible early-stage companies, this platform will also aim at investments in fragile and low-income nations.
This platform will expand on the Foundation’s investments and efforts to build technology networks in Africa, the Middle East, Central Asia, and Pakistan over initiatives such as the Foundation’s Startup Incentive Program. The Foundation has invested in businesses such as Twiga Foods, a technology-driven company that connects consumers, vendors, and suppliers, providing access to high-quality foods, products, and retail services in Africa; and Toters, a prominent on-demand service platform in Lebanon and Iraq.
In support of the IDA Private Sector Window Blended Fund, the platform will receive an additional $50 million, assisting to mitigate the risks of investments in low-income countries. In addition, IFC will mobilize capital from other development institutions and the private sector to support entrepreneurs and technology firms in these countries.
About the International Finance Corporation (IFC)
International Finance Corporation is the largest global development institution focused on the private sector in emerging market countries. It is a member of the World Bank Group. IFC operates in more than 100 countries across the globe, using its capital, expertise, and influence to create markets and opportunities in developing countries. In the financial year 2022, the Foundation is committed to delivering a record level of financing of $32.8 billion to private businesses and financial institutions in developing countries, depending on the strength of the private sector to exterminate poverty and promote shared prosperity, at a period when the markets of these countries are contending with the aftermaths of the worsening financial crises.