The US International Development Finance Corporation (DFC, formerly known as OPIC) has inked an agreement to back a Dutch impact investment firm to support debt funding to small and medium enterprises in West Africa and the Sahel (the region bordering Sahara desert).
The DFC has signed a $14.75 million loan portfolio guaranty with Stichting Cordaid and its impact investment firm, Cordaid Investment Management, as part of the deal. The DFC provided the guaranty alongside $2 million in first loss grant capital from the US Agency for International Development’s West Africa Trade and Investment Hub through the 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 DFC’s acting chief executive officer Dev Jagadesan.
The guaranty to Cordaid, an organisation working to end poverty in fragile and conflict-affected countries, will support lending to SMEs and microfinance institutions (MFIs) in Burkina Faso, Guinea, Mali, and Sierra Leone. Cordaid expects to lend at least $37 million to 50 SMEs and eight MFIs by 2025, supporting at least 2,100 new jobs and 8,000 microentrepreneurs.
At least 30% of lending is 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.
Cordaid Investment Management’s managing director Hann Verheijen, said, “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.”
The Hague-based Cordaid Investment Management manages impact investment funds, providing patient capital to MFIs and SMEs. It seeks to strike a balance between social and financial return, and to open markets in which investors would not otherwise be able to invest in.
The DFC is an American development bank that invests across sectors including energy, healthcare, critical infrastructure and technology.