Six Development Institutions Committing Financing to Blended Finance Vehicle Co-Created by Bamboo Capital Partners and the UN Capital Development Fund (UNCDF)
Over US$60 million has been committed from six member states and development institutions representing Canada, the United States, Norway, Luxembourg, Sweden and the Nordic states through the Nordic Development Fund—to the BUILD Fund, a blended impact investment vehicle, as well as its associated technical assistance facility, to finance small and medium-sized businesses in the world’s least developed countries (LDCs) to help achieve the Sustainable Development Goals (SDGs). The announcement of the financing commitments was made today at this year’s Finance for Development Forum (FFD) in New York.
The Bamboo-UNCDF Initiative for the Least Developed (“BUILD”) is an innovative blended impact finance vehicle designed to bring finance to small-and-medium sized enterprises (SMEs) and entities that have the potential for strong development impact in the world’s frontier markets or least developed countries. Managed by Bamboo Capital Partners, the Fund provides growth capital to businesses identified, supported and nurtured by UNCDF. The BUILDER Technical Assistance (TA) Facility is managed at arm’s length by UNCDF, which will be closely involved in pipeline generation, portfolio building, and business advisory support to businesses.
So far, the BUILD Fund has received a total of US$55 million in financial commitments which will be deployed via a variety of modalities, including as first-loss financing to absorb early financial losses; a guarantee protection against credit losses; and senior debt financing. Additionally, the US$6.5 million in financial commitments to the BUILDER TA Facility will be deployed to provide much-needed pre- and post-investment business advisory support to BUILD’s prospective and active investees. The commitments breakdown as below:
- Luxembourg: Anchor investor with Euro 2 million in first loss to the BUILD Fund
- Global Affairs Canada (Canada): up to CAD 24.7 million in first loss to the BUILD Fund (in addition to CAD 6.8 million for BUILDER TA Facility / CAD 32 million, including funds for monitoring and evaluation)
- Norad (Norway): US$3 million in first loss to the BUILD Fund (in addition to ~$0.9 million for BUILDER TA Facility)
- Nordic Development Fund (NDF): US$10 million in first loss to the BUILD Fund
- Swedish International Development Cooperation Agency & U.S. Development Finance Corporation (Sida/USDFC): US$10 million (US$5 million each) in loan guarantees
- U.S. Development Finance Corporation (USDFC): US$10 million in senior debt financing to the BUILD Fund
The BUILD Fund is designed to attract concessional, semi-commercial and select commercial growth finance to early-stage businesses, especially in the agriculture, renewable energy and financial inclusion sectors, with the ultimate goal of achieving significant progress towards the SDGs in its target countries. The BUILD Fund is one of the few investment funds in the market to focus on LDCs. Through the BUILD Fund, UNCDF and Bamboo Capital Partners are aiming to capitalize the financing gap that affects SMEs - including women entrepreneurs - in frontier markets, where growth is constrained by a lack of access to follow-on financing. This financing gap, otherwise known as the “Missing Middle,” occurs when the capital needs of firms and projects are too large for microfinance institutions and too small for commercial finance; a gap that overwhelmingly impacts frontier markets and least developed countries.
The BUILDER TA Facility is designed to provide impactful pre and post investment business advisory support to prospective and active investees of the BUILD Fund. Such support could for example consist in enhancing the financial management, training in how to define and track social and environmental goals, developing and documenting operational procedures and best practices, creating a methodology and a framework to track and report selected gendered impact indicators, etc.