Challenges

Investors perceive a high risk in emerging market investments. To mobilize additional private capital, a first-loss was implemented to catalyze private investments. The first-loss was co-financed by SECO and a large private sector bank.

Primary target

Which group does your product/service primarily target?

Description of Innovation

The fund benefitted from 10% first-loss risk protection, cofinanced
equally by public and private funds, designed to attract greater private
capital flows to investment activities in emerging and frontier markets. The fund confirmed that such investments are commercially viable and private investors perceive them as less risky.
SECO, together with a large private sector bank, sponsored the first loss and the impact report. The report looks at new ways to measure key economic and social outcomes at the SME level. The Loans for Growth fund successfully promoted SME financial inclusion, job creation
and entrepreneurship and generated significant development impact, such as higher business performance, more jobs and increased safety of the work environment. The LFG fund provided loans to SMEs in emerging and frontier markets via financial institutions active in the SME segment. Through its loans, LFG aimed to support inclusive economic growth.

Results

Demonstration of viability of EM impact investments and effectiveness of first loss guarantees (here 10% of Fund total AUM.