IFC and Partners for Growth (PFG), a US-based fund manager, have collaborated to provide much-needed debt funding to innovative early- to mid-stage companies in emerging markets, with an emphasis on fintech, software, e-logistics, health, and life sciences.
The International Finance Corporation (IFC), a World Bank Group member, will invest $30 million in a new investment vehicle managed by PFG. PFG’s first managed account dedicated solely to global emerging markets, and IFC’s first investment with a private debt manager focusing on venture and growth-stage economies, will be the vehicle. PFG will work on the effort alongside Silicon Valley Bank, a long-time strategic partner.
“The COVID-19 pandemic has heightened uncertainty and risk aversion in emerging markets, limiting the amount of credit available for small- to mid-sized companies,” said Paulo de Bolle, Global Senior Director of IFC’s Financial Institutions Group. “Our partnership with PFG will play a key role in improving access to finance for deserving high growth technology businesses.”
As the world adjusted to the epidemic, the adoption of digital commerce has advanced dramatically in the last two years. The potential for impact is greatest in emerging markets as they recover in the coming years. This alliance will help small and medium businesses in the technology industry flourish, as well as allow new financial services providers to emerge.
Deepening capital markets is critical to boosting the economy’s recovery. The relationship with PFG aligns with IFC’s objective of scaling up investments to reverse the economic decline, encourage technical innovation, and mobilize private capital at scale by offering infrequently available private finance to creative enterprises in developing nations.
The rapid rise of venture capital over the last two years has increased the amount of equity funding accessible to technology companies, but the specialist lending market in many emerging nations remains underdeveloped. The IFC and PFG collaboration is aimed at closing this finance gap.
“Across the global markets where PFG invests, we see some of the most compelling opportunities from emerging markets, where companies can create new categories and pioneer solutions that deliver impact. Building upon the momentum behind rapid digital adoption, innovative companies are providing localized solutions that allow them to leapfrog incumbent firms and legacy technologies. Fintech companies are bringing financial services to vast underbanked populations, enhancing financial inclusion and supporting economic growth, while opening new attractive markets across a broad range of financial services,” said Andrew Kahn, Managing Director, and CEO of PFG. “We are thrilled to be working with IFC on this partnership to bring new capital solutions to technology and innovation companies in emerging markets.”
The partnership is expected to help promote the development of the private sector debt market in emerging nations by proving the viability of lending to growth-stage companies, in addition to providing debt capital to creative tech companies.
The new effort will allow IFC to participate in PFG’s eligible lending and investment transactions in an indirect manner. Each qualifying PFG investment in emerging markets will be allocated to IFC.
PFG focuses in global growing company alternative debt investments. PFG has established seven funds and invested over $1.2 billion in over 220 firms through unique debt instruments since its inception, with a track record spanning more than 30 years, including the managers’ time working together at San Francisco investment bank Hambrecht & Quist.
