IFC Launches $225 Million Platform to Strengthen VC Ecosystems in Africa, Middle East
IFC has launched a new $225 million platform to strengthen venture capital ecosystems and invest in early-stage companies addressing development challenges through technological innovations in climate, health care, education, agriculture, e-commerce, and other sectors to help build the digital economy in Africa, the Middle East, Central Asia, and Pakistan.
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.
The growth potential, however, is enormous across these regions. In Africa, for example, the digital economy has the potential to contribute $712 billion to the continent’s gross domestic product (GDP) by 2050. In the Middle East and North Africa, technology could boost GDP by 40%, or $1.6 trillion, and create 1.5 million manufacturing jobs in the next 30 years. In Pakistan, the digital transformation can unlock up to $59.7 billion in annual economic value by 2030, equivalent to about 19% of the country’s GDP.
“Support for entrepreneurship and digital transformation is essential to economic growth, job creation, and resilience,” said Makhtar Diop, IFC’s Managing Director. “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.”
The platform intends to boost the region’s emerging venture capital markets, which have shown early growth potential but face challenging global economic conditions. IFC will make equity or equity-like investments in IT startups to help them grow and attract conventional equity and debt financing. The platform will also be used by IFC to collaborate with other World Bank Group teams to establish and strengthen venture capital ecosystems through legislative reforms, sector evaluations, and other tools. The platform will also emphasize investments in low-income and fragile countries, assisting in the development of a pipeline of credible early-stage companies.
The platform will build on IFC’s investments and efforts to build tech ecosystems in Africa, the Middle East, Central Asia, and Pakistan through initiatives such as the IFC Startup Catalyst Program. IFC has invested in companies like 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.
The platform will be backed by an additional $50 million from the Blended Finance Facility of the International Development Association’s Private Sector Window, which helps de-risk investments in low-income countries. In addition, IFC will mobilize capital from other development institutions and the private sector to support entrepreneurs and tech companies in those countries.
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