World Bank’s IFC Launches A new $225m Platform to Invest in Early Stage Startups in Africa, Others

The World Bank’s investment arm, the International Financial Corporation (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.

This fund was created to aid in the growth of the digital economy within Africa, Middle East and Central Asia. These regions receive less funding for digital investments than the rest.

According to the IFC, these regions received less than 2 percent of $643 billion in global venture capital funding last fiscal year. According to the corporation, access to capital is being hampered by the slowdown in global venture capital investments, the COVID-19 pandemic and the rise in food- and supply-chain costs, higher interest rates and currency depreciation. Additionally, tech ecosystems are not yet established in countries such as Egypt and South Africa, Nigeria, Pakistan and Senegal.

Below is a press release from the IFC stating that the regions offer enormous potential for economic growth and that it, along with investment capital firms will bet on this huge capital.

These regions have enormous growth potential. In Africa, for example, the digital economy has the potential to contribute $712 billion to the continent’s gross domestic product (GDP) by 2050. Technology can boost the Middle East and North Africa’s GDP by 40% (or $1.6 trillion) and create 1.5million manufacturing jobs over 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 aims to strengthen the regions’ nascent venture capital markets, which have demonstrated early growth potential but face challenging global economic conditions. IFC will invest equity in startups or equity-like ventures and help them grow into scalable ventures which can attract both mainstream equity and debt financing.

IFC will also make use of the platform to work with other World Bank Group teams to build and strengthen venture capital ecosystems via regulatory reforms, sector analyses and other tools. The platform will focus on investments in low income and fragile countries, and generate a pipeline for credible early-stage businesses.

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 Program. IFC has invested in companies such a Twiga, a Kenyan-based technology-based food distribution platform; TradeDepot an ecommerce startup connecting African retailers with international brands; and Toters, which is a leading online 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. IFC will mobilize capital both from private and development institutions in order to support entrepreneurs, as well as tech companies, in these countries.