Increasing investment flows across borders and boosting global trade through the competitive sale of goods and services are key drivers for economic growth in most economies. Boosting demand through global trade sustains economic growth and offers greater employment opportunities. They are essential tools to reduce poverty and improve people’s living standards.
At the same time, competitive markets are critical to achieving sustained per capita GDP growth. The ability of developing countries to achieve economic growth through export promotion is limited to those countries that can compete internationally. U.S. and international firms and investors tend to make direct investment in countries that have a low-cost, low-risk business environment, as well as a good trade and investment climate.
Creative’s projects unlock the private sector’s potential to catalyze growth and impact development by facilitating partnerships that increase competitiveness, market access and export capabilities of private enterprises in Latin America, Africa and Asia. Reducing risk of private sector investment and trade transactions among anchor and lead firms in key sectors can increase jobs, productivity and competitiveness across value chains and industries.
Creative is rapidly growing its portfolio of trade and investment projects, working with the private sector and local partners to support sustainability and export competitiveness by providing opportunities for investment, access to finance and technical assistance in building market linkages to increase international and regional trade. For instance, we have forged partnerships with the private sector to improve livelihoods of vulnerable populations in Asia and Africa by building forward and backward market linkages and access to capital to micro, small and medium enterprises (MSMEs) owned and operated by ethnic minorities.
As the prime implementer of the USAID West Africa Trade and Investment Hub, a $140 million trade and investment facilitation activity that improves private sector competitiveness in West Africa, we promote regional and international trade and investment through innovative blended finance solutions.
Blended finance utilizes public assets to mobilize private investment and financing in emerging markets. The gap between official development assistance and the investment requirements of developing economies is huge and can only realistically be financed by mobilizing private capital and capital markets.
In blended finance transactions, development agencies, working in partnership with development finance institutions and philanthropic actors, use strategies to improve the risk-adjusted return profile of a deal, thereby making it more appealing to investors. The Better Utilization of Investment Leading to Development (BUILD) Act passed by Congress in 2018 doubled the assets and mandate of the U.S. International Development Finance Corp. (DFC) and encourages the use of public resources to leverage private investment. USAID and DFC are two key agencies Creative works within blended finance programs and transactions.
Creative manages one of the largest co-investment grant facilities in the world to leverage private capital, create jobs and increase exports and trade competitiveness. The Trade Hub works in 18 countries in the region. Creative manages the $96 million grants facility in partnership with USAID bilateral missions (Nigeria, Ghana, Senegal, Cote d’Ivoire, Liberia and Cape Verde) and the West Africa and Sahel Regional Missions. The Trade Hub is funded through buy-ins from USAID missions and Prosper Africa and the Women’s Economic Development Program. USAID invested an additional $50 million in the Trade Hub recognizing its unique role to rapidly partner with the private sector to provide goods and services and sustain employment to address the secondary economic impacts of the pandemic.
Creative is using a digital platform, open solicitation co-creation processes, a virtual deal room and other innovative tools to partner with private investors, financial institutions and African and U.S. companies. This innovative blended finance program uses co-investment grants to leverage $400 million in private capital at a minimum 5:1 leverage ratio, create more than 60,000 jobs (half for women and youth) and support more than $300 million in exports to the U.S. under the Africa Growth Opportunity Act (AGOA) and across the region and other export markets.
As of March 2021, the Trade Hub has a pipeline of over $1.1 billion in private investment seeking co-investment partnerships. The Trade Hub and USAID have approved 11 co-investment partnerships valued at $10.7 million across the West Africa region. These grants will help catalyze over $70 million of new private investment (a 7:1 leverage ratio), create over 11,000 new jobs and generate almost $60 million of new exports. Some highlights include:
Blended Finance for Agriculture: In Nigeria, the largest population and economy in Africa, the Trade Hub has five co-investment partnerships underway:
- WACOT Rice will support more than 5,000 farmers to help increase local rice production in Nigeria’s Kebbi state.
- Koster Keunen will introduce beekeeping activities as a secondary revenue source in seven countries, including Nigeria, that will generate more than $5 million in beeswax exports to the U.S.
- CrossBoundary will target agribusiness SMEs in Nigeria, Ghana, Mali and Burkina Faso to assist entities engaged in building operational and cash flow resilience among SMEs affected by the pandemic.
- IITA-BIP will introduce a new high-yielding soybean seed under the Trade Hub’s Research and Development initiative to increase yields and incomes for smallholder farmers.
- REMIF REMS will support 3,000 farmers to increase rice production in Cross River and Ebonyi states and respond to food security concerns caused by the pandemic.
Cordaid’s West Africa Bright Future Fund for the Sahel: In partnership with Cordaid Investment Management, the Trade Hub designed a blended finance waterfall structure, including a $2 million investible first loss grant, to establish the West Africa Bright Future Fund. Combined with a Dutch Postcode Lottery investment and a U.S. International Development Finance Corp. 50 percent credit guarantee, the impact fund aims to attract private investment. The Trade Hub hosted a virtual launch of its partnership with Cordaid Investment Management B.V. The event highlighted this dynamic partnership to launch Cordaid’s $32 million West Africa Bright Future Fund that targets investment in SMEs in Burkina Faso, Guinea, Mali and Sierra Leone.
Virtual Deal Room: The Trade Hub recently launched its Virtual Deal Room. This innovative platform now allows investors to connect with a selection of diversified, investment-ready businesses chosen from the Trade Hub’s broader portfolio. Both potential investors and the companies selected are vetted prior to gaining access to the VDR.
- Export competitiveness: Co-investment grants with each partner increase productive capacity to meet the standards of U.S. and other foreign buyers. To promote AGOA, the Trade Hub continually provides technical assistance to businesses interested in exporting goods duty-free to the U.S. through market linkages with U.S. buyers.
- Rapid Covid-19 Response: The Trade Hub is focused on COVID-19 rapid response with an additional $50 million to inject working capital and financing to many companies adversely affected by the pandemic economic impact and to sustain firms to retain their employees and supply chain operations.