IFC has launched a new US$225 million platform to strengthen venture capital ecosystems in Africa, Middle East, Central Asia, and Pakistan, and invest in early-stage companies addressing development challenges through technological innovations in climate, healthcare, education, agriculture, e-commerce, and other sectors.
In 2021, these regions collectively received less than two per cent of US$643 billion of global venture capital funding, yet the growth potential is enormous. In Africa, for example, the digital economy has the potential to contribute US$712 billion to the continent’s gross domestic product (GDP) by 2050.
IFC’s new platform aims to strengthen the regions’ nascent venture capital markets, which have demonstrated early growth potential but face challenging global economic conditions. IFC will make equity or equity-like investments in tech startups and help them grow into scalable ventures that can attract mainstream equity and debt financing. IFC will also use the platform to collaborate with other teams in the World Bank Group to create and bolster venture capital ecosystems through regulatory reforms, sector analyses, and other tools.
The platform will build on IFC’s investments and efforts to build tech ecosystems in Africa, Middle East, Central Asia, and Pakistan through initiatives such as the IFC Startup Catalyst Programme. 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.
“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 will be backed by an additional US$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 mobilise capital from other development institutions and the private sector to support entrepreneurs and tech companies in those countries.