International financial institutions (IFIs) are teaming up to support local businesses with private equity financing in the Caucasus.
The EBRD (European Bank for Reconstruction and Development), IFC (International Finance Corporation, a member of the World Bank Group), FMO (the Netherlands development bank) and BSTDB (Black Sea Trade and Development Bank) will invest in the Caucasus Growth Fund. This new fund is backed and managed by SEAF (Small Enterprise Assistance Funds), a global fund manager.
IFIs are initially providing US$40 million and the Small Enterprise Assistance Funds (SEAF) will contribute an additional US$2 million to the SEAF Caucasus Growth Fund, with a target size of US$70 million. It will be the first institutional-quality fund dedicated to providing debt and equity capital to small and medium enterprises (SMEs) in Armenia, Azerbaijan and Georgia.
Through their collaboration, the international financial institutions are supporting private equity investments in the SME segment, which is the backbone of the Caucasus economies and plays a key role in job creation. The Fund will invest across a range of industries, with particular focus on consumer and business services, agribusiness, distribution, energy and retail, which remain under-served by other capital providers.
"Fostering entrepreneurship in the countries that strive towards a market economy is the cornerstone of the EBRD's strategy. The overwhelming majority of the EBRD's activities support private sector developement. The EBRD is delighted to join forces with its partner IFIs and SEAF to support the development of the private equity sector in the region. This project will bring much-needed resources and knowledge to support the development of prospective businesses,” said Paul-Henri Forestier, EBRD Director for Caucasus, Moldova and Belarus.
Tomasz Telma, IFC Director for Europe and Central Asia, said: “Lack of capital is one of the most serious challenges for small and medium enterprises in the southern Caucasus. Through its investment in the SEAF Caucasus Growth Fund, IFC is helping address an important obstacle to these small and medium enterprises, which represent the backbone of economic diversification and employment."
“Support towards the development of small and medium enterprises in the Black Sea region is a strategic priority for BSTDB, a regional development institution. The SEAF Caucasus Fund will facilitate access to affordable capital for competitive private businesses in Armenia, Azerbaijan and Georgia and foster good business practices and knowledge transfer. The project is also a demonstration of the positive synergies between development partners in promoting sustainable growth and job creation through private sector development in the region” said Andrey Butin, BSTDB Director for Financial Institutions.