Funded

Build Malawi Window: A Specialized Structured Blended Finance Vehicle for Agribusiness

Country
Malawi
Region
Africa
Impact Areas
Food systems and agriculture
Status
Fundraising

Financials

Progress in funding
22.758620689655%
8,250,000 of 36,250,000 USD
Total requested (USD)
8,000,000
Allocated by Joint SDG Fund (USD)
8,000,000
Co-Funding (USD)
250,000
Total Funding (USD)
8,250,000
Leverage Target (USD)
28,000,000

Results

The BUILD Malawi Fund is operational after being incorporated in Luxembourg under the Bamboo Capital Partners' BUILD Fund architecture and capitalized with the first loss tranche. The Fund has pre-screened companies is expected to execute its first investments in early 2022.



The programme

Why

Malawi records one of the lowest rates of investment in Africa with an average of only 15 percent of GDP invested from 2000 to 2018, compared to 24.5 percent in Tanzania and 34.7 percent in Zambia. Such an environment obstructs small and medium enterprises' (SMEs) access to finance. This means that many businesses run by women and other vulnerable groups are unable to grow, and Malawi's economy is unable to become inclusive. Malawi’s low rates of impact investing are primarily due to the relative infancy of the market, particularly for non-Development Finance Institution investors, coupled with falling levels of Foreign Direct Investment.


What

The programme will work to end poverty and hunger by increasing investment in agriculture and other manufacturing and service supply-chains, as well as increasing productivity within these supply-chains through technology and innovation, and achieving gender equality by supporting business where women are significantly represented in boards, management, staff, suppliers, or buyers. The programme aims to create 3,000 jobs (30% minimum for women and youth), integrate 75,000 small-scale producers into investees' supply chains, increase participating small-scale producers’ income by 30%, expand fiscal space with aggregated income taxes of US$ 19.3 million, and strengthen 15 supply chains.


How

The BUILD Fund Malawi and accompanying BUILDER Technical Assistance facility will support businesses with a combination of loans, equity and technical assistance. The BUILD Fund Malawi is a structure blended finance window of the BUILD fund, managed by Bamboo Capital, with a target capitalization of US$ 35 million. Through the BUILDER facility, technical assistance will be provided to businesses both before and after investment to improve quality of their growth and SDG impact as well as reduce associated risks and costs.



Financial instruments

The US$ 35 million impact fund has a US$ 15 million first loss layer and a US$ 20 million mezzanine tranche. It will employ senior loans, subordinated loans and mezzanine equity ranging from US$ 250,000 to US$ 2.5 million to support projects in the target sectors. The average timeframe for investments is 3 years, but they can last up to 8 years. The Fund has an estimated IRR of 5%, and 21 projects have been preliminarily identified for due diligence and potential investment.


UN Implementers


undp-logo
logo UNCDF
food-and-agriculture-organization-of-the-united-nations-fao-logo

Partners


Ministry of Trade – Principal Secretary
Old Mutual
Nico Holdings
FCDO
Bamboo Capital Partner
DFID Department for International Development

Latest

Impact Areas

Energy and climate action

This impact area covers financing solutions that leverage public and private resources for cleaner and more efficient energy systems and climate adaptation and mitigation action.

Energy accounts for two-thirds of total greenhouse gas, being the main contributor to emissions production. Despite 70% of clean energy investments are privately financed worldwide, in accordance to a special report developed by energy investments on clean energy in developing economies needs to expand by more than seven times, to above US$ 1 trillion, to put the world on track to reach net-zero emissions by 2050. Catalytic grants from the Joint SDG Fund are a critical bound to development finance institutions lending and attract private capital injections. Our portfolio brings financial solutions that span from lending and impact investing to insurance and smart subsidies. It aims to attract private investment to markets and sectors at early stages of readiness – or in situations where the risks are hard to mitigate, such as energy access projects for vulnerable communities or in remote areas.

Blue Economy

This impact area scopes financing solutions that leverage public and private resources for the blue economy.

The monetary value of the world’s oceans has been estimated at US$ 24 trillion by the World Wide Fund for Nature. This wealth is at risk because overfishing, pollution and climate change put an unprecedented strain upon marine ecosystems. Oceans are getting warmer, stormier and more acidic, impacting the health of sensitive marine ecosystems and the lives of human communities that rely on them. Ocean reefs, the home of the planet’s most diverse ecosystem, contribute to the livelihoods of at least 500 million people worldwide generating US$ 36 billion per year for the global tourism industry. Our programmes and pipeline in the blue economy space bring financing solutions that are adapted to the needs of island nations and coastal communities to preserve marine resources and coral reefs while offering income opportunities to coastal populations. They support scalable blue economy businesses, through equity and debt finance, risk guarantees, performance grants, incubation and technical assistance, to build resilience in coastal ecosystems and create jobs not only to allow us to save our planet, but also to build more resilient economies.

Food systems and agriculture

This impact area consists of financing solutions that leverage public and private resources for sustainable agricultural systems and enhanced food security.

Poverty is deeply intertwined with successes or failures in agriculture and food security, with the majority of the rural poor depending on agriculture and natural resources for their livelihoods. Recent estimates from FAO show that nearly 10% of the world population is still undernourished. The impacts of climate change, conflicts and Covid-19 pandemic take an even higher toll - resulting in an estimated 118 million more people suffering from hunger and one in three people not having access to adequate food in 2020. On the other hand, the ecological footprint of the global food system continues to grow in terms of energy, resource use, and the contribution to greenhouse gas emissions. To address these issues, the traditional approach to food policy must be reoriented towards food-system-wide approaches that provide incentives for investments in inclusive and sustainable development of food systems and for steering consumer behavior and food preferences toward healthier and more sustainable diets. Investments in food system innovations are key in driving change towards more a more sustainable and food secure future. Our programmes and pipeline in this area include solutions financial solutions that include microcredit and microinsurance, downscaling schemes from multilateral development banks, and a variety of blended finance facilities supporting agricultural supply chains, smallholder farmers, rural development, nutrition, and sustainable farming transitions. repurpose finance to support sustainable and resilient food systems, reduce finance that is destroying/degrading food systems, optimize finance to mobilize investment and increase access, and scale up public and private finance flowing to healthier diets. Examples include blended finance facilities, de-risking and collateral support mechanisms, sovereign and impacts bonds, business incubators, among others.

Social Impact

This impact area covers financing solutions that leverage public and private resources for social impact sectors including health, education, waste, water, and sanitation. These include Innovative financing concepts that improve the well-being of people and communities, especially vulnerable groups.

Leave no one behind (LNOB) is the central, transformative promise of the 2030 Agenda for Sustainable Development. LNOB not only requires the elimination of social practices that leave particular groups of people further and further behind, but it also demands equal access to basic services, resources and opportunities for all. This will come at a cost. Achieving LNOB will require significantly more financing than is currently invested in human and sustainable development, and for these funds to be channeled towards improving the lives of those who are furthest away from reaching SDG targets. Focusing on the social sectors, the Overseas Development Institute estimates that global financing requirements for education, healthcare, and social protection transfers alone amount to US$ 137 billion annually in low-income countries. While these sectors require large investments to make the required transition, they often rely on public funds. These are rarely the sectors that private funds invest in, as their objective is to earn a return that is higher than the initial investment, no matter how minimal. Therefore, our programmes and solutions focusing on LNOB innovate the way we finance and address these barriers and close the financing gap, by offering viability gap financing, early stage capital investments, de-risking mechanisms, smart subsidies, and technical assistance to empower people and early stage enterprises driving impact in key social sectors.