IFC launches new platform to bolster digital economy in Africa, Middle East, Central Asia, and Pakistan

IFC has launched a $225-million platform to help build the digital economy in Africa, Middle East, Central Asia, and Pakistan.

This will be used to strengthen venture capital ecosystems and invest in early-stage companies in order to address development challenges through technological innovations in climate, health care, education, agriculture, e-commerce, and other sectors.

“Support for entrepreneurship and digital transformation is essential to economic growth, job creation, and resilience,” said Makhtar Diop, IFC’s Managing Director.

He said IFC’s Venture Capital Platform will help tech companies and entrepreneurs expand during a time of capital shortage, thus creating scalable investment opportunities and backing countries’ efforts to build transformative tech ecosystems.

Diop said they have always wanted to help develop homegrown innovative solutions that are not only relevant to emerging countries but one that can also be exported to the rest of the world.

In 2021, Africa, Middle East, Central Asia, and Pakistan received less than 2% of the $643 billion global venture capital funding.

Access to capital was exacerbated by the slowdown in global venture capital investment, the COVID-19 pandemic, rise in food and supply chain costs, higher interest rates, and currency depreciation.

To make matters worst, tech ecosystems were nascent or even nonexistent outside of more established markets such as Egypt, Kenya, Nigeria, Pakistan, Senegal, and South Africa.

But despite all these, growth potentials remained enormous across these regions. In Africa, the digital economy has the potential to contribute $712 billion to the continent’s gross domestic product (GDP) by 2050.

In the Middle East and North Africa, technology is expected to boost GDP by 40% or $1.6 trillion and create 1.5 million manufacturing jobs in the next 30 years. In Pakistan, digital transformation can unlock up to $59.7 billion in annual economic value by 2030, which is equivalent to about 19% of the country’s GDP.

IFC’s new platform aims to strengthen the regions’ nascent venture capital markets, which have demonstrated early growth potentials but were faced with challenging global economic conditions. It is designed to make equity or equity-like investments in tech startups and help them grow into scalable ventures that can attract mainstream equity and debt financing.

IFC will also be using the platform to collaborate with other teams in the World Bank Group to create and bolster venture capital ecosystems through regulatory reforms, sector analyses, and other tools as it also focuses on investments in low-income and fragile countries and help generate a pipeline of credible early-stage companies.

Moreover, the platform will be backed by an additional $50 million from the Blended Finance Facility of the International Development Association’s Private Sector Window, which helps de-risk investments in low-income countries.