IFC Supports MSMEs, Renewable Energy in Madagascar

IFC has announced an investment in Madagascar’s first sustainability bond, which was issued by Société Générale Madagasikara (SGM) to support renewable energy projects and small business growth in the country.

IFC anchored SGM’s inaugural three-year sustainability bond with local currency, Malagasy Ariary funding, equivalent to about $11.5 million. The fund was co-anchored by FMO, the Dutch Entrepreneurial Development Bank, and Proparco, a subsidiary of the Agence Française de Développement Group focused on private sector development, which invested $10 million each. The bond issuance, which raised $36.4 million in total, will support eligible projects and businesses that demonstrate environmental and/or social impact.  

IFC’s funding will support access to finance for micro-, small- and medium-sized enterprises (MSMEs), in a country where the funding gap for such businesses is an estimated $2.6 billion, more than a quarter of Madagascar’s annual GDP.

IFC’s investment helped mobilize capital from other investors, which increased the overall funding available for small businesses and sustainability projects in Madagascar. As the first sustainability bond and largest ever issuance in the country, the bond is also expected to help develop the local capital markets.

“IFC’s support of SGM’s groundbreaking sustainability bond signals our commitment to helping achieve inclusive and resilient economic growth in Madagascar,” said Mehita Fanny, IFC Country Manager for Madagascar. “As we work together to help provide vital financial support to small businesses, with a specific focus on sustainable ventures, we unlock new ways to create jobs and drive down some of the vulnerabilities introduced by climate change.”

IFC’s investment will be supported by the International Development Agency Private Sector Window (IDA PSW) Blended Finance Facility, which will provide a pooled first loss guarantee for the investment, and the IDA PSW Local Currency Facility. It will be processed under IFC’s Base of the Pyramid Platform, a facility that supports lending by financial institutions to help small businesses in emerging markets recover from the COVID-19 pandemic and inter-related struggles.

IFC has been supporting access to credit for MSMEs in Madagascar since 2018, through both funding and risk sharing facilities to local financial institutions. To date, IFC has partnered with six financial institutions in the country, supporting up about $100 million equivalent in local currency funding to smaller businesses.

These investments are complemented by advisory services that include supporting the private sector to develop digital financial services, strengthening the country’s credit ecosystem and assisting financial institutions to enhance their risk management processes.