UNCDF/Bamboo Capital - BUILD SME Fund

Agenda 2030 and its various development goals are still strongly underfunded in a global perspective. In order to meet the global challenges and mobilize the resources required to achieve the goals in Agenda 3030, different types of partnership, innovation and greater collaboration between different societal actors are needed. The private sector plays an important role to meet the challenges facing the world, by being able to contribute to creating sustainable solutions and supporting a good economic, social and ecological recovery that also includes the sustainable use of natural resources. Currently, Sida provides support to a number of challenge funds that promote companies with innovative products and services that contribute to development goals, which are often considered too risky for banks and investors. Many social innovations in smaller companies often end up “empty handed” as they do not qualify for either grants or loans, as they are considered insufficient commercially to get loans and too business-oriented to receive grants. At present, Sida believes that such investments are most easily made through increased collaboration with established and experienced organizations with routines and processes in place to be able to manage private capital, such as UNCDF's collaboration with Bamboo Capital. The link between capital and the need for loan financing for various community services and products has so far not been realized to any great extent in low- and middle-income countries. Sida has a number of ongoing global guarantee collaborations aimed at stimulating institutional investments in sustainable infrastructure, but a guarantee to the BUILD fund means a clearer focus in LDC and small businesses that currently have difficulty accessing loan capital at the local level. Furthermore, the guarantee is expected to contribute to creating synergies between already achieved results from the challenge funds that Sida currently supports and the projects that will receive loan financing from the BUILD fund. Based on the structure of the guarantee, there are opportunities to achieve good demonstration effects, which in the long term may promote a system change when it comes to lending in LDC. Sida further believes that the effort has the potential to be both catalytic and demonstrative. Hence, Sida has good expectations that the market will, thanks to the BUILD fund and UNCDF's work, be prepared to invest in similar approaches if the outcome is successful.