I&P and USAID partner to accelerate small growing businesses in the Sahel regionSubmitted by Admin on Thu, 10/06/2016 - 12:13
The impact investing group Investisseurs & Partenaires (I&P) announces a partnership with the US Agency for International Development (USAID) to launch an innovative acceleration program in Niger, Burkina Faso and Senegal. The alliance aims to bring high potential start-ups and Small Growing Businesses (SGBs) to an “investment ready status”, with the underlying objective of building a sustainable entrepreneurial support ecosystem in these financially underserved countries.
An acceleration mechanism for Small Growing Businesses in the Sahel region
The Alliance between I&P and USAID is a response to one of the key obstacles facing start-ups and early-stage small and growing businesses (SGBs) in Sub-Saharan Africa: access to seed finance and investment-readiness services. In the Sahel region, seed financing mechanisms are non-existent Most SGBs face high barriers in access to finance. The SGB support ecosystem is very sparse and currently not tooled to make SGBs investment-ready.
The alliance aims to bridge the gap of investment readiness for SGBs in the Sahel region with a focus in Niger, Senegal and Burkina Faso. Its main objective is to facilitate access to finance for 52 SGBs in the next three years. The program will use a combination of seed funding, in the form of small no-interest no-collateral loans, and high-touch coaching by expert investment teams in order to maximize the chances of the SGBs to raise follow-on funding.
USAID’s support will generate a strong leverage effect on African private capital, with the objective to unlock USD 5.6 million in equity and debt investments from investors, banks and business angels into early-stage businesses requiring individual investments between 40 000 USD and 400 000 USD.
The message of Rob Schneider, Division Chief, U.S. Global Development Lab, USAID
"At the U.S. Agency for International Development (USAID), we know that small and growing businesses (SGBs) are critical drivers of economic growth but are often unable to access the capital they need. They require small investments—between $50,000 and $500,000—but the high costs of due diligence, lack of cash flow, and limited collateral often prevent traditional financial institutions from providing early- and seed-stage funding.
Along with many others in this field, we believe that mobilizing local capital and local talent may be an answer to this problem. Together, USAID and I&P are responding to one of the biggest challenges in impact investing—risky early- and seed-stage investments—by creating a model for SGB support to more effectively find and connect local private capital with promising SGBs and investment opportunities.
Through the U.S. Global Development Lab’s Partnering to Accelerate Entrepreneurship (PACE) Initiative, we are partnering to support three locally managed and locally funded investment funds, which will accelerate growth for 52 SGBs through seed funding, coaching, and networking and unlock $5.6 million in investments in West Africa.
In this new partnership model, these investment funds provide pre-investment services that promising entrepreneurs need, such as financial record keeping and business plan support. These investment-ready SGBs will be better prepared to receive capital from I&P’s three indigenous funds—Teranga Capital, Sinergi Niger, and Sinergi Burkina in Sénégal, Niger, and Burkina Faso respectively—which are better situated to address investment challenges than their international counterparts. Their on-the-ground fund managers have a nuanced understanding of the regional entrepreneurial ecosystem and their hands-on approach deploys local capital efficiently.
Together, as we support SGBs receiving local private capital managed by local fund managers, I&P and USAID are paving the way for sustainable early-stage investment models, building a market for SGB investment-readiness services in West Africa, and unlocking the potential of promising enterprises for greater growth in the region."
The partners of the project
The partnership is coordinated by Investisseurs & Partenaires (I&P), an impact investing group that has a strong footprint and experience in West Africa, and is implemented by Sinergi Niger, Sinergi Burkina and Teranga Capital, three in-country impact funds sponsored by I&P. “We have a sound knowledge of the financing challenges for SGBs in the Sahel region and we have a good investment track record. Throughout our investments we have proven that our investment model based on partnerships between international and local financial institutions, business angels as well as corporates has positive development impact.” said Jean-Michel Severino, President of Investisseurs & Partenaires (I&P). Sinergi Niger, Sinergi Burkina and Teranga Capital invest in start-ups, early-stage and small growing businesses with a strong growth and impact potential and that have financing needs between 40,000 and 400,000 USD. Together they have already financed 10 SGBs, and thanks to the program they plan to make 20+ new investments in the next 3 years.
The project will support USAID’s development objectives in the target countries by focusing on SGBs with high developmental impact, and in particular by investing in SGBs active in the value chains of agriculture, health, education and essential goods and services.
Sinergi Niger's team (c) Béchir Malum
The Partnering to Accelerate Entrepreneurship (PACE) Initiative aims to catalyze private-sector investment into early-stage enterprises and identify innovative models or approaches that help entrepreneurs bridge the pioneer gap – thus unlocking the potential of thousands of promising enterprises around the world.
Working in partnership with over 40 incubators, accelerators, and seed-stage impact investors, USAID’s U.S. Global Development Lab has created seventeen public-private partnerships dedicated to testing ways to bridge this gap and foster entrepreneurship. These partnerships are expected to leverage $100 million in combined public and private investments over their lifetimes.