WASHINGTON, D.C., March 1, 2001
—Working together to strengthen one of the key sources of employment in the developing world, IFC and Small Enterprise Assistance Funds (SEAF) today launched a global partnership to help small and medium enterprises (SMEs) gain greater access to financing and consulting services.
SEAF—a US - and Dutch-based non-governmental organization (NGO) operating a network of 14 commercially driven investment funds around the world—will receive US$850,000 in support from IFC’s SME Capacity Building Facility to help fund the $2.5 million initiative. SEAF is contributing $733,000 from its own resources and drawing on other sources of funding that include the US Agency for International Development; the Dutch and Swiss governments; and the Citizens Democracy Corps, a US organization sending senior business executives to work as volunteers with SMEs in poor countries. IFC’s support is also expected to mobilize additional resources from other donors in the future.
With $140 million under management, SEAF operates under a unique “equity plus assistance” model. It typically involves investing in high growth-potential SMEs with 10 to 100 employees and annual revenues of $200,000 to $2 million—too small to interest mainstream private equity investors, yet essential in the local economic context.
After taking a minority equity position, SEAF works intensively with investees to build value, providing a combination of fee-based and donor-funded customized consulting services in key areas such as marketing, finance, and management before eventually selling its stake. In 12 years of operation it has helped create 7,000 jobs and boosted the competitiveness of more than 160 SMEs. Its exits from its funds have achieved cumulative weighted average returns on investment exceeding 30 percent.
Recent efforts include:
Estonia:
In September 2000, SEAF led negotiations in the 3.9 million EURO sale of technology company Regio to Finnish industrial group DONE. The transaction completed a 14-month period in which SEAF both invested and helped Regio change its strategic focus, then facilitated its entry into the high-value Geographical Information Systems (GIS) business. SEAF’s Baltics fund realized a profitable exit in the sale of its stake in Regio.
Bolivia:
Jolyka is a maker of environmentally sound hardwood flooring products in Cochabamba whose production processes have been independently certified by the internationally recognized Forest Stewardship Council. After investing $600,000, SEAF oversaw a thorough financial restructuring at the company and helped it find new buyers in the United States and Europe. In the last year Jolyka has seen annual revenues climb from $850,000 to $2.2 million, and won a $25,000 award from the World Resources Institute for having one of Latin America’s best “green business plans.”
Since 1999, IFC has invested $17 million in four different SEAF-managed funds. The new partnership agreement is expected to help the organization scale up considerably, covering the cost of effectiveness-building tools such as new management information systems and specialized financial personnel. IFC will also help attract additional private investors into SEAF’s funds and enable it to begin working in Africa and other regions. Discussions are also underway about possible support for a SEAF e-commerce initiative to expand access of SMEs to markets via a new business-to-business (B2B) portal on the Internet.
IFC executive vice president Peter Woicke said SEAF had established itself as a key channel of finance to the vital but underserved SME market and presented several new areas of potential collaboration with the World Bank Group. He hoped IFC could help take the organization to the next level, increasingly attracting private capital into its funds and channeling it down to market segments that needed it most.
SEAF’s CEO, Bert van der Vaart, said IFC’s participation would help SEAF reach many more SMEs than in the past, thus enabling it to build ever-increasing numbers of model small and mid-sized companies in some of the world’s most challenging environments.
The mission of IFC, part of the World Bank Group, is to promote sustainable private sector investment in developing countries as a way to reduce poverty and improve people’s lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses.
