As the African continent grapples with the covid-19 that has plunged the continent into a recession, created a shortfall in the inflows of FDI and dropped millions into poverty, the International finance Corporation, member of the World Bank Group, has announced a $2 billion commitment in new direct financing for micro, small and medium businesses on the continent and also increase trade in Africa in a bid to galvanize Africa’s economic recovery from the pandemic and sustain business activities across sectors hit hard by the coronavirus pandemic.
The IFC in a statement on Wednesday evening revealed that $1 billion in new direct financing for African small businesses, including via mezzanine financing and risk-sharing instruments; while it will further invest another $1 billion to support international trade finance for Africa to facilitate the flow of imports and exports of essential goods including food and medicals. Meanwhile, the commitment is among the corporation’s largest ever package to specific initiatives in Africa.
It can be recalled that in 2020, the IFC reported a global fast-track financing facility in the tune of $8 billion to support resilience and recovery for existing IFC clients and also help sustain the economies and prevent jobs during the global crisis which dragged Africa into its first recession in 25 years and also shrank the total FDI into the region by 18 per cent. However, it was later announced by the corporation that over half of the $8 billion initially announced has been disbursed already, of which more than 30 per cent went tin IFC clients in Africa.
Makhtar Diop, IFC Managing Director, in a comment on the $2 billion package for Africa, said, “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. 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 IFC chief further revealed that the MSME finance initiative will support African trade flows of critical goods by making available trade guarantees, risk-sharing facilities, and support to smaller businesses into imports and exports.
“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,” it said. And further citing that 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.