Sources of Financing Part 2 – IFC

B.Sun

The IFC is a member of the World Bank Group that focuses on promoting sustainable private sector development. Established in 1956, the IFC is a profit oriented institution and finances private sector enterprises. Services provided include direct financing and advisory services. To qualify for IFC funding a project must: 1) be located in a developing country that is a member of IFC; 2) be in the private sector; 3) be technically sound; 4) have good prospects of being profitable; 5) benefit the local economy; and 6) be environmentally and socially sound. There are 179 member countries belonging to the IFC, including the majority of CEE countries. The IFC sets a ceiling on new projects at 25% of the total estimated project cost and 35% for exceptionally small projects. A list of countries and corresponding IFC investments are listed below as reference:

Poland joined the IFC in 1987 and has been the recipient of $279 million in direct financing from the IFC and an additional $67 million from other banks. 32 projects have received financing from a wide range of sectors. A list of publicly disclosed projects for Poland can be found at http://www.ifc.org/ifcext/eca.nsf/Content/Poland_InvestmentProjects.

Belarus joined the IFC in 1992 and has been the recipient of $71.5 million in direct financing. A total of eight projects have been funded in the financial and agribusiness sectors. IFC advisory services have also been at work in Belarus since 1993, where the IFC has been a significant catalyst for the privatization of small businesses.
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Croatia joined the IFC in 1993 and has been the recipient of $353 million in direct financing from the IFC and an additional $97 million from other banks. The IFC has focused mainly on building up financial markets; two financial institution projects have received close to $150 million already in direct financing.

Additional information for most CEE countries can be found at http://www.ifc.org/ifcext/eca.nsf/.

An informational page on how to get financing is provided by the IFC at http://www.ifc.org/ifcext/about.nsf/Content/How_Apply_Financing. To apply for financing, an entrepreneur or company must submit an investment proposal with the IFC either through the coordinating department, regional department, or nearest field office. Guidelines for writing an investment proposal can be found at http://www.ifc.org/ifcext/about.nsf/Content/Investment_Proposals.

Sources of Financing Part 1 – SEAF

B.Sun

SEAF (Small Enterprise Assistance Funds) is an international tax-exempt investment organization that sponsors and manages for-profit investment funds that target small businesses in 23 countries, many of them in CEE. Founded in 1989, SEAF currently has $180 million invested in small enterprises in Europe, Latin America and Asia. SEAF provides direct financing ranging between $1 – $5 million, drawn from 23 funds it manages for its investors. Investors in SEAF include the EBRD, International Finance Corporation and U.S. Agency for International Development.

SEAF operates on a commercial basis and requires a rigorous standard of financial capability, corporate governance and visionary leadership. Its investment activities focus specifically on nations with emerging markets and/or markets that have problems securing capital for reasons such as size of investment, location or fragmentation. A list of criteria establishing whether a business qualifies as an investment target can be found at http://www.seaf.com/policies.htm.

SEAF funds are invested through structured equity participations in partnership with local entrepreneurs and senior management. Investments also generally include exit rights due to SEAF’s for-profit nature. Funds can be self-liquidating for certain businesses or used to obtain majority ownership rights in a business. Currently, 85 companies are actively managed by SEAF. While the company does not disclose performance reports to the public, investment performance reports for the totality of SEAF’s funds are available at http://seaf.com/SEAF_glance.htm. SEAF has enjoyed a 1.6x rate of return on its investments in portfolio companies. SEAF has disbursed $131 million and grown the net worth of these companies to $209 million.

SEAF has also published a comprehensive report of SME’s impact on emerging markets and global economies. Volume 1 of the report can be found at http://seaf.com/SEAF%20Dev%20Impact%20Vol%201.pdf. Volume 2 is a compilation of case studies and can be found at http://seaf.com/SEAF%20Dev%20Impact%20Vol%202%20-%20Case%20Studies.pdf. These reports provide excellent insight drawn from SEAF’s 18 years of experience investing and growing SME’s in developing countries.

To apply for funding, contact the appropriate office in your country from http://www.seaf.com/offices.htm.

More on the EBRD

B.Sun

Since the EBRD’s formation, many CEE countries have benefited from their involvement. Listed below are a few nations that have flourished as a result of receiving direct support from the EBRD:

In the Czech Republic, the EBRD has financed over 100 projects and invested over €1 billion in the Czech Republic since 1992, resulting in a total project value amounting to nearly €5 billion. This result reflects a remarkable transition to a modern market economy making the Czech Republic one of the most competitive economies in the EU. The Czech Republic is also slated to be the first of eight EBRD countries that joined the EU in 2007 to graduate from the EBRD’s program.

In Hungary, the EBRD has financed nearly 100 projects and invested €1.85 billion in Hungary. The EBRD has helped Hungary emerge as one of the most advanced countries in the EU. Ninety percent of economic activity is conducted through private enterprise. Furthermore, an open channel of foreign investment and an open foreign trade regime have been established.

In Romania, the EBRD has financed 127 projects totaling €3.6 billion. The EBRD has also effected significant privatization and enterprise restructuring, resulting in Romania’s acceptance into the EU in 2007. Monetary and fiscal challenges still pose an issue in Romania, but the EBRD has published strategies for combating the slow in economy growth and monetary fragility that may arise.

 

For more information including comprehensive case studies, a list of approved projects for each country and current updates please visit www.ebrd.com.

EBRD in CEE

B.Sun

The fall of the Berlin Wall in 1989 served as the impetus for the formation of the EBRD in 1991, when communist regimes gave way to democracy and private industry. It is under this backdrop that the EBRD’s mandate was established. To qualify for EBRD support, a prospective country must demonstrate that it is committed to democratic principles. For example, the Czech Republic is a multi-party parliamentary representative democratic republic.

Another interesting facet is that although the EBRD is owned by public sector shareholders, it invests mainly in private enterprise. Over 60 countries own shares in the EBRD, with the US possessing about 1/10 of these shares. The EBRD possesses a €30 billion bankroll with which to select and diversify its projects and has attracted, through co-financing, over €65 billion from outside investors. While the EBRD does invest a nominal amount of money in public institutions, the objective is usually to reform infrastructure in order to promote private enterprise.

EBRD project funds are available for most sectors, including agribusiness, energy efficiency, financial institutions, manufacturing and telecommunications. A full list can be found at www.ebrd.com. Their website also provides a list of each country in which projects have been or are being conducted, as well as comprehensive project summary documents detailing the strategy behind each project and the current progress attained.

Additional background information as well as a report on the EBRD’s cooperation with the Council of Europe may be found at http://assembly.coe.int/Main.asp?link=/Documents/WorkingDocs/Doc06/EDOC10950.htm.