Targeting sectors hit hard by COVID-19, the International Finance Corporation (IFC) has announced a $2 billion commitment to support smaller businesses and increased trade in Africa to galvanize the continent’s economic recovery from the pandemic and to sustain and create jobs and business activity.
IFC will invest $1 billion in new direct financing for MSMEs, the backbone of African economies, including via mezzanine financing and risk-sharing instruments. IFC will invest a further $1 billion in support of international trade finance for Africa to facilitate the flow of imports and exports of essential goods, including food and medical products.
The combined $2 billion package is among IFC’s largest-ever commitments to specific initiatives in Africa and comes as the continent grapples with the ongoing fallout from COVID-19, which has plunged the region into recession, reduced foreign direct investment flows, and pushed millions of more Africans into poverty.
“To create the conditions for an inclusive and sustainable recovery, it is essential to expand and adapt our approach to MSME financing and ensure that trade—which is the lifeblood of economic activity—flows without interruption,” said Makhtar Diop, IFC Managing Director. “This is a critical time for people, businesses, and economies across Africa. Long-term recovery will depend on getting funding to the pillars of the economy that need it today.”
The $1 billion MSME finance initiative will provide smaller businesses—that were already credit-constrained before the pandemic, and that now face increased risks and uncertainty—with new sources of funding, beyond traditional ones. The focus will be on job-creating sectors while accelerating access to financial services through digital channels, and agri-food, given the continent’s persistent food security issues.
Meanwhile, the $1 billion for recovery in African trade will support trade flows of critical goods by providing trade guarantees, risk-sharing facilities, and support to SME importers and exporters. Besides food and medical products, the focus will be on supporting trade in the green energy and climate-smart agriculture sector.
These initiatives are open to public and private partners who wish to join IFC.
COVID-19 has already dragged Africa into its first economic recession in 25 years, stifling private sector momentum and shrinking foreign direct investment to the continent by 18 percent. To support resilience and recovery, IFC in 2020 announced a global $8 billion fast-track financing facility for existing clients to help sustain economies and preserve jobs during this global crisis. Over half of the $8 billion has already been deployed, of which more than 30% went to IFC clients in Africa.
