Private Sector & Development #41 - "Acting in fragile contexts" by Agence Française de Développement

ACCESS TO ENERGY FINANCIAL INCLUSION MOBILISATION PEACE AND STABILITY ENTERPRISE SUPPORT ACTING IN FRAGILE CONTEXTS FINANCING, PARTNERSHIPS, INNOVATION 41 PROPARCO’S MAGAZINE SECOND QUARTER 2024

Private Sector & Development

is published by Proparco, Agence Française de Développement Group, share capital of EUR 1,353,513,248

151, rue Saint-Honoré, 75001 Paris - France

Tél. (+33) 1 53 44 31 07

E-mail: nous-contacter@proparco.fr

Website: www.proparco.fr/en Blog: proparco.fr/en/private-sectordevelopment-magazine

Publications director Françoise Lombard

Founder Julien Lefilleur

Editorial director and editor in chief Laurence Rouget-Le Clech

Deputy editor Pierre Tiessen

Editorial support Claudia Di Quinzio

Editorial committee

Guillaume Barberousse, Axelle Bergeret-Cassagne, Laure Bourgeois, Myriam Brigui, Marianne Cessac, Jérémie Ceyrac, Fariza Chalal, Christophe Cottet, Djalal Khimdjee, Olivier Luc, Elodie Martinez, Gonzague Monreal, Gregor Quiniou, Emmanuelle Riedel Drouin, Françoise Rivière, Laurence Rouget-Le Clech, Bertrand Savoye, Samuel Touboul, Baptiste Tournemolle, Hélène Verrue

Advisory board

Jean-Claude Berthélemy, Paul Collier, Kemal Dervis, Mohamed Ibrahim, Pierre Jacquet, Michael Klein, Nanno Kleiterp, Ngozi Okonjo-Iweala, Jean-Michel Severino, Bruno Wenn, Michel Wormser

Graphic design and creation LUCIOLE

Photos credits Front cover: iStock

Translations Jean-Marc Agostini, Neil O’Brien/Nollez Ink

office

SUMMARY

Development finance institutions: how to operate in fragile countries?

By Thomas Husson and Emma Sanchis Peris

FISEA: venture capital for fragile countries

By Charline Jan

36 ANALYSIS

How to invest responsibly in fragile and conflict-affected settings?

By Josie Lianna Kaye and Benjamin Miller

38 INTERVIEW

The challenge of energy supply and energy bills in fragile countries : the example of Nigeria

By Olivier Leruste

Supporting the agricultural sector in fragile contexts

By Claire Fillatre, Fariza Chalal and Quentin Elie

FEFISOL II fund and Entrepreneurs du Monde: two complementary approaches in fragile contexts

Interview with Natasha Olmi and Marie Ateba-Forget

Financing MSMEs in crisis situations: ACME’s experience in Haiti

By Sinior Raymond and Marie Pascale Théodate 28

At the forefront of the humanitariandevelopment-peace nexus, the International Committee of the Red Cross Interview with Juan Coderque

44 SPOTLIGHT

The ARIA initiative: enabling DFIs to extend their vital role to Africa’s frontier markets

By Vivianne Infante and Alex Kucharski

46 OP-ED

The transformative role of the private sector in forced displacement

By Michel Botzung

50 LATEST ISSUES

( : ? ! ; ) D O U B L E P O N C T U A T I O N Printing on FSC Mixte - certified paper Pure Impression – ISSN 2103-334X Legal deposit at publication 23 June 2009 04 CONTRIBUTORS 07 COORDINATORS 0 8 OVERVIEW

Editorial

12 ANALYSIS

SPOTLIGHT

FEATURE

24 FEATURE

KEY

FIGURES

32 CASE STUDY

Myriam Brigui Director of Business development & Regional offices, Proparco

If no action is taken, fragile countries will account for 80% of the world’s poverty by 2030, according to the OECD. They will then be the root cause of most of the humanitarian, health, security and environmental crises facing the world. These regions are also over-represented (16 out of the 25 most affected countries) among those places that will suffer the worst effects of climate change. Moreover, the global crisis linked to the sharp increase in the number of forcibly displaced people (currently over 110 million) is set to worsen, according to UNHCR projections. These different challenges converge, accumulate and feed off each other in fragile countries - where we have to simultaneously deal with emergency situations, combat poverty over the long term and factor in the impacts of climate change.

Faced with these challenges, the importance of the private sector’s role in boosting economic resilience, access to employment and essential services, is more and more widely recognised. Investing in fragile countries is becoming an increasingly important part of the strategies of Development Finance Institutions (DFIs) and a topic of discussion at international forums such as the World Economic Forum and the United Nations. Investment in the private sector of fragile countries is not only something desired by international experts: players on the ground are calling for it! The initiatives undertaken by various development finance institutions and their partners, presented in this issue of Private Sector & Development, amply demonstrate this. Responding to these expectations is made more difficult by the volatile situations and the less structured nature of clients. The challenges of investing more – and more effectively – in fragile countries are real: Proparco's experience, like that of other DFIs present in these regions, shows that investments there are on average smaller in size, the funds are disbursed more slowly and the risk is much higher than in the rest of their portfolio.

This issue offers a lucid analysis of these complex situations, while presenting solutions and innovations that are emerging in response. In particular, it highlights the need for a focused approach: a better analysis of the contexts and a good knowledge of the ground are essential for assessing the risks associated with projects more effectively as well as for measuring the impact of investment on conflict situations and ensuring that it works in favour of peace.

Investing in fragile countries also requires DFIs to work in partnership to share resources and analyses - as demonstrated by the ARIA platform, presented in this issue. New partnership initiatives are emerging, bringing together players from NGOs and the development and private investment spheres (such as the Humanitarian Resilience Initiative), or the partnership between the ICRC and Proparco. But these alliances will only make sense if development finance institutions are able to adapt their offering and take the necessary risks in these countries, as part of proactive strategies and with the support of their shareholders.

03 EDITORIAL

Head

Marie Ateba-Forget

of social microfinance, Entrepreneurs du Monde

Marie Ateba-Forget is head of social microfinance at Entrepreneurs du Monde. She coordinates both the development of nine microfinance institutions (MFIs) in Asia, Haiti and West Africa and the association’s strategy in this domain. Marie has over 13 years’ experience in the sector, working in the field as an analyst with MFIs (in Peru and Burkina Faso), and at Entrepreneurs du Monde’s head office.

Fariza Chalal Investment in Agribusiness division, Proparco

Fariza Chalal joined Proparco in 2008 and is currently an Investment in the Agribusiness Corporate Financing division. She has over 18 years’ experience working for law firms and in-house legal teams on financial structuring and private sector financing in developing countries.

Michel Botzung

Head, IFC-UNHCR joint initiative on private sector solutions in forced displacement

Michel Botzung leads the joint initiative of the International Finance Corporation and the United Nations High Commissioner for Refugees, aimed at promoting private sector engagement in forced displacement contexts. His career at the IFC has unfolded on the ground in Africa, South Asia, and the Middle East, focused on supporting SMEs and adapting development finance institutions to new contexts.

Juan Coderque

Senior advisor on Innovative Finance, Humanitarian Innovative Finance Hub and the International Committee, ICRC

Quentin Elie

Intern, Agribusiness division, Proparco

Quentin Elie has joined Proparco’s Agribusiness Corporate Financing division for his end-of-studies internship. Quentin is a master’s student on the Audencia’s Grande École programme and previously gained experience in the Audit department of PwC Luxembourg and in the M&A and Investor Relations team at Cdiscount.

04 CONTRIBUTORS

Claire Fillatre Head of Agribusiness division, Proparco

Claire Fillatre joined Proparco in 2017 and took charge of the Agribusiness Corporate Financing division in 2021. In this role, she is tasked with defining and deploying Proparco’s strategy in this sector and deploying agribusiness financing projects in developing countries. Claire is a graduate of ESCP Europe Business School and holds a Master’s degree in Business Law from the University of Paris I - Panthéon-Sorbonne. She spent the early part of her career with HSBC France.

Vivianne Infante Director & co-leader ARIA initiative, BII

Vivianne Infante is a Director at British International Investment, co-leading ARIA. Since 2015 she has also been BII’s Country Director for Ethiopia (covering the Horn of Africa) and the DRC. Her investment coverage responsibilities include deal origination, portfolio management support and representative responsibilities. Vivianne qualified as corporate Solicitor in England and Wales in 2004 and worked at the City law firm White & Case as a Project Finance and International Arbitration lawyer.

Thomas Husson

Head

of “Investing in Fragile Contexts”, Proparco

Thomas Husson joined AFD Group in 2005 and he is currently in charge of “Investing in Fragile Contexts” at Proparco. He previously worked as Regional Director for Central Africa in Cameroon and as a project manager in the financial sector in Asia, based in Bangkok for 5 years. During his career, Thomas has headed up many different programmes in Africa, the Middle East and Asia, focusing on private sector development and environmental investment. Thomas is a graduate of Sciences-Po Paris and ESCP Europe Business School and was a civil auditor at the Ecole de Guerre in Paris.

Charline Jan Principal, Proparco

Charline Jan joined the Private Equity division of AFD Group in 2018. She vets and oversees equity investments in businesses and investment funds within the Africa and Middle East team and she is also in charge of monitoring the FISEA initiative at Proparco. Charline previously worked for two impact investment funds (Oikocredit and Pamiga) and she is a graduate of Audencia and a lecturer at HEC Paris business school.

Alex Kucharski Manager & co-leader ARIA initiative, BII

Alex Kucharski is a Manager at British International Investment, straddling technical assistance and financial institutions, and is a co-leader of ARIA. He set up BII’s portfolio of country technical assistance programmes, which aim to unlock investment in frontier markets, such as Myanmar (now closed), Nepal and Ghana. Prior to joining BII, Alex lived in Sierra Leone, Liberia, Ghana and Northern Nigeria, working on private sector development programmes.

05 CONTRIBUTORS CONTRIBUTORS

Olivier Leruste

Managing Partner of Echosys Invest and co-founder of Echosys Advisory

Managing Partner of Echosys Invest and co-founder of Echosys Advisory, Olivier is an expert in financing solutions and raising funds for renewable energy projects. Before co-founding Echosys Advisory in 2020, he was head of financing for French developer Akuo, where he raised over €2 billion to finance solar, wind, hydroelectric and biomass power plants. Before this, Olivier was a banker in the Energy & Commodities division of BNP Paribas in New York and Mexico, and an economist with Crédit Lyonnais.

Benjamin

Miller Senior Advisor, TrustWorks Global

Benjamin is a Senior Advisor at TrustWorks and an expert on conflict-sensitive business operations, business and conflict/peace, and business and human rights. He has worked with companies in the oil and gas, mining, construction, renewable energy, and fast-moving consumer goods industries, and in more than 25 countries, including conflict-affected states such as Burundi, Colombia, and Nigeria. Ben is currently participating in a multi-year research project on small and medium enterprises in violent, urban contexts.

Sinior Raymond Chief Executive Officer, ACME

Sinior Raymond began his career in Haiti’s traditional banking sector in 1990 and started working in the microfinance industry in 1997. He moved to Association pour la Coopération avec la Micro Entreprise (ACME), a micro-credit institution, in 2001 as Executive Director and in 2009 he became CEO of Action pour la Coopération avec la Micro Entreprise (ACME SA), the limited company set up by the Association. Sinior has a degree in business management and accountancy and he has taken courses in Frankfurt, Germany and Boulder in the United States to hone his skills in microfinance.

Josie Lianna Kaye CEO, TrustWorks Global

Josie is the CEO of TrustWorks Global (TrustWorks). She specialises in responsible business and investments in conflict contexts. She has over 18 years of experience working with diverse multinational corporations, development financial institutions and international organisations on issues related to conflict-sensitivity, peace finance and conflict prevention in the Middle East and Sub-Saharan Africa. Josie holds a PhD from the University of Oxford on the role of licit and illicit business actors in the dynamics of conflict and peace.

Natasha Olmi

FEFISOL II fund portfolio coordinator, Solidarité Internationale pour le Développement et l’Investissement (SIDI)

Natasha Olmi has been in charge of coordinating the FEFISOL II portfolio since its launch. She has been working at Solidarité Internationale pour le Développement et l’Investissement (SIDI) for six years, beginning as a partnership officer for West Africa. Natasha has over nine years’ experience of financing microfinance institutions and agri-food businesses in Africa.

Marie Pascale Théodate Director of Strategy, Marketing, Communication, Studies and Developement, ACME

Marie Pascale Théodate gained her initial experience of microfinance at the Inter-American Development Bank (IDB) in Washington and then at the United Nations Development Programme (UNDP) in Haiti. She subsequently set up and structured the Executive Board of the National Association of Microfinance Institutions in Haiti. Since March 2018, Marie Pascale has been Director of Strategy, Marketing, Communication, Studies and Development at ACME SA.

06 CONTRIBUTORS

Clément Bacot Senior Investment Officer, Proparco

Clément Bacot joined the Financial Institutions and Inclusion Division in 2022, with a specific focus on microfinance in fragile situations. He previously worked in corporate finance on agricultural and agribusiness projects within Proparco, and as financial manager and then operations manager with the NGO Acted in the Middle East. Clément began his career in KPMG's advisory department after graduating from EM LYON business school.

Clémence Guyot Investment Officer, Proparco

Clémence Guyot joined Proparco in 2018 after 5 years with Société Générale and then BNP. She is currently an Investment Manager with the Financial Inclusion and Innovation team, in charge of financing projects for microfinance institutions in the MENA region and South-East Asia. Clémence is a graduate of EDHEC Business School.

Ichem Besseghir Principal, Proparco

Ichem Besseghir has been an Investment Manager in the Energy, Digital and Infrastructure division since 2018 where he covers all infrastructure sectors with a sector-specific focus on waste, water and sanitation, and a geographical focus on the Middle East and Central Africa. Prior to this, Ichem worked for over ten years in project and asset finance at several French banks.

Alexandre Reverdi Project manager, “Fragile situations, Crises and Conflicts”, AFD

Alexandre Reverdi specialises in projects to strengthen public institutions in fragile countries and he joined AFD's Crises and Conflicts Division in 2023. He is currently responsible for monitoring the Minka Peace and Resilience Fund in the Middle East. He is also Proparco's point person at AFD for private sector issues in crisis and conflict zones.

Emma

Sanchis Peris Investment Officer, Proparco

Emma Sanchis Peris has been heading up the Fragile Countries Facility since joining Proparco in 2022 and she specializes in project management and evaluation in vulnerable contexts. She is a graduate of Université Paris-Dauphine and holds a double Master's degree in Development Analysis from CERDI (Université de Clermont Ferrand). She helps to ensure more effective integration of geographic intelligence specific to fragile or conflict-affected zones and is also involved in adapting Proparco's financial products.

07 COORDINATORS

Development finance institutions: how to operate in fragile countries?

Thomas Husson, Head of “Investing in Fragile Contexts”, Proparco Emma Sanchis Peris, Investment Officer, Proparco

Development finance institutions (DFIs) are increasingly called to invest in fragile countries, facing a diversity of challenges linked to security, economic and environmental issues. The private sector has a highly diversified, informal and resilient presence in these regions. How can DFIs provide support in such contexts, while ensuring that their impact is a positive one?

Over the last decade1, the notion of fragility has become central in the development policy debate. It was initially deployed by international organisations to draw attention to “fragile states” and is now used to refer to fragile or conflict-affected geographical regions and the challenges they face.

Cyprien Fabre, Head of the OECD’s Conflict, Crises and Fragility Unit, defines fragility as “the imbalance between risks and the capacity to deal with these risks – when there is an imbalance, there is fragility”.2 This combination of exposure to risk and inadequate state capacity, systems and communities to deal with it is apparent across six dimensions3: economic, environmental,

political, security, social and human. Adopting a multi-dimensional, multi-criteria approach to fragility should enable development players to analyse risk factors and their consequences, and to devise appropriate solutions.

According to World Bank figures, 4 10% of the world’s population – and 40% of people living in extreme poverty – currently lives in a fragile country, a figure that is forecast to rise to over 66% by 2030. Over 75% of the 800 million people without access to electricity live in these countries.5 Acting with great determination in such regions is therefore essential if we are to achieve sustainable development objectives on a global scale.

1 Ferreira, I. A. (2017). “Measuring state fragility: a review of the theoretical groundings of existing approaches.” In Third World Quarterly, 38, pages 1291 to 1309.

2 Ausha / Les Voix du développement (2024). Cyprien FABRE: L’argent, le nerf du développement

3 OECD (2022), States of Fragility 2022, Éditions OCDE, Paris. See https://doi.org/10.1787/c7fedf5e-en.

4 World Bank (2022). Poverty and Shared Prosperity 2022: Correcting Course. Washington, DC : World Bank. See http://hdl.handle. net/10986/37739 License: CC BY 3.0 IGO

5 International Growth Centre (2021). Powering up energy investments in fragile states. See https://www.theigc.org/blogs/powering-energyinvestments-fragile-states

08 OVERVIEW

While fragility is presented as a multidimensional imbalance between risks and capacities, it is important to emphasise that factors of fragility are interdependent and mutually reinforcing. Recent studies conducted by the International Monetary Fund (IMF) stress that the impacts of climate change are already being felt more acutely in fragile countries, notably in many Pacific island states and across the Sahel.6 These effects are apparent in temperatures that endanger human health, reduced agricultural productivity, rising sea levels and extreme weather events. These countries have a poor capacity for dealing with these risks, for example by maintaining satisfactory agricultural production in the event of extreme heat or providing appropriate health services for those affected. Climate risks will therefore only exacerbate conflicts over access to resources. The interaction between conflict situations and climate issues are therefore leading the international community to develop an approach based around the climate-fragility-conflict link. 7

Fragile countries are often those most exposed to macro-economic shocks and may suffer from

the consequences of distant conflicts on world markets. For example, the war in Ukraine has pushed up food prices (in December 2023, food and cereal prices were still around 12%-13% higher than in December 20208), making certain basic food products difficult to access for the poorest populations in certain African and Middle Eastern countries. Lastly, the refugees crisis has a particular impact on countries adjacent to conflict zones, which are themselves often poor and fragile. According to the United Nations High Commissioner for Refugees (UNHCR)9, 110 million people were displaced in 2023 (including 62.5 million within countries in conflict). Low- and middle-income countries took in 75% of refugees and other people in need of international protection, and 20% of this number went to the least developed countries. Against this backdrop, the issue of private investment in fragile countries is becoming an increasingly important part of the international debate on peace, stability and development, whether this be at the Paris Peace Forum, the World Economic Forum or in the debating chamber of the United Nations.

While fragility is presented as a multidimensional imbalance between risks and capacities, it is important to emphasise that factors of fragility are interdependent and mutually reinforcing.

AN ARTICLE BY THOMAS HUSSON

EMMA SANCHIS PERIS

Emma Sanchis Peris has been heading up the Fragile Countries Facility since joining Proparco in 2022 and she specializes in project management and evaluation in vulnerable contexts. She is a graduate of the Université Paris-Dauphine and holds a dual Master’s degree in Development Analysis from CERDI (Université de Clermont Ferrand). Emma helps to ensure more effective integration of geographic intelligence specific to fragile or conflict-affected project zones and is also involved in adapting Proparco’s financial products.

7 Vivekananda,

Climate Challenges in Fragile and Conflict-Affected States

Dan Smith (2014). “Climate Resilience in Fragile and Conflict-Affected Societies: Concepts and Approaches.” In Development in Practice 24, No. 4, pages 487 to 501.

8 Economics Observatory (2024). How is the war in Ukraine affecting global food prices?

9 UNHCR (2023). Global Trends Report 2022. See https://www.unhcr.org/global-trends-report-2022

IMF / Laura Jamarillo, Aliona Cebotari, Yoro Diallo, Rhea Gupta (2023). Janani, Janpeter Schilling and

09 OVERVIEW

A

PRIVATE SECTOR WITH SPECIFIC FEATURES

Even more than in other places, the private sector in fragile countries cannot be considered as a monolith: it is fundamentally diverse and heterogeneous. However, we do note that it is predominantly informal, accounting for 70% of employment in these countries (compared with a global average of less than 50%). The bulk of formal businesses – those that are incorporated with administrative bodies and use a recognised accounting system – are SMEs (over 90%), for whom a fragile business environment poses unprecedented challenges. In addition to security constraints, public services have little capacity to provide essential services, and access to financial services, credit and infrastructure is highly complicated. This unfavourable environment comes at a heavy cost. For example, a recent study by the International Trade Center10 reveals that it costs on average 15 times more to set up a formal business in the fragile countries

studied than in high-income countries. Lastly, there are fewer large national and international companies than in developing countries. They are more resilient but face specific problems in terms of environmental and social risk management, compliance and reputation, linked to their complex environment.

The resilience of the private sector and employment in these specific contexts represents a major challenge, especially if we include demographic factors in areas with a very high proportion of young people. In such conditions, the lack of economic prospects and access to employment can quickly become a source of increased instability. The development of the private sector and decent jobs are fundamental to “securing the peace dividend” and breaking the cycle of instability, as the World Development Report highlighted in 2011.11

DFIS’ GROWING COMMITMENT TO THE PRIVATE SECTOR IN FRAGILE COUNTRIES

In recognition of the challenges faced by the private sector in these geographies, more and more development finance institutions and impact finance players are dedicating specific resources to fragile countries, with the aim of boosting economic growth by setting up financial instruments adapted to the contexts (risk-taking, loan maturities, technical support, etc.). It is hoped that the impact of these strategies will strengthen local infrastructure, create economic opportunities for populations and therefore reduce social tension and the risk of conflict. To achieve this, DFIs prioritize those projects that create sustainable and decent jobs, mitigate and adapt to climate change and reduce inequalities.

The International Finance Corporation (IFC) was the first to commit to this approach back in 2008 with the Conflict Affected States in Africa (CASA) programme and it has now made fragile countries a central part in its strategy. European DFIs were closely involved in the first Oxford Fragility Forum organised in 2019 in partnership with the IFC. That year, Proparco devised its first strategy dedicated to fragile countries, focusing on off-grid energy, financial inclusion and the agribusiness sector in Africa. Partnerships are emerging to structure cooperation between DFIs, such as the ARIA platform developed by British International Investment (BII) and the Dutch Entrepreneurial Development Bank (FMO), which seeks to

10 International Trade Center (2023). Small Businesses in Fragility: from Survival to Growth 11 World Bank (2012). World development report 2011 : conflict, security, and development – overview

DEVELOPMENT FINANCE INSTITUTIONS: HOW TO OPERATE IN FRAGILE COUNTRIES? 10

develop a joint approach to prospecting in six fragile African countries (see article on p.44).

Operational dialogue between humanitarian agencies and DFIs is also growing in importance. The IFC has a long-standing partnership with the UNHCR, while Proparco launched a joint initiative with the International Committee of the Red Cross (ICRC) in 2023 (see article on p. 38). However, private sector financing in these fragile contexts presents many challenges for DFIs.

Proparco’s experience in these regions mirrors that of other development finance institutions, illustrating the very real difficulties in coming up with a satisfactory business model in these situations that is both operational and efficient

in terms of economic, social and environmental objectives, especially in those 20 countries that are both fragile and least developed. Fragile country portfolios are characterised by smaller-than-average unit investment outlay, longer disbursement times and a much higher level of risk. Investing in fragile countries also exposes DFIs to potentially greater reputational risks than in stable and peaceful countries and it is also more difficult to enforce the environmental and social standards to which they are committed. These findings clearly illustrate the fact that while DFI intervention in fragile countries is strategically relevant, it involves multiple challenges that must be met by mobilising specific resources and forging partnerships.

PROMOTING PEACE AND SUSTAINABLE DEVELOPMENT

DFIs in fragile countries must ultimately integrate the notion of “conflict sensitivity” in a concrete and operational manner. In countries affected by conflict, the argument for investment impact cannot be based solely on the assumption that creating decent jobs necessarily guarantees positive outcomes for peace. Similarly, highlighting positive environmental or social impacts is not enough to ensure that the investment does not generate distortions that could actually fuel the conflict. These risks exist across all sectors for those DFIs working in these regions, but they are easier to foresee in projects with a large “land footprint”, such as agri-business, forestry or other natural resources, which may be disputed between several groups and fuel marginalisation, exclusion and corruption.

DFIs must therefore start out with a good understanding of these local contexts in order to design appropriate investments and manage their risks, rather than adopting top-down approaches based on solutions implemented elsewhere. It is unfortunately a common mistake to analyse these fragile country contexts based on the notion of a lack or an “absence of” something – an absence of the state, public services, governance, stability, a formal private sector, etc. – whereas it would be more appropriate to analyse them in terms of “overload”. In other words, highly complex contexts, creating conflicts of legitimacy and generating many forms of instability. New initiatives between DFIs and innovative partnerships with specialised organisations are emerging to tackle this issue and they feed into the constantly changing debate over the private sector’s contribution to peace and sustainable development objectives in fragile countries.

FOCUS PROPARCO

Proparco is a subsidiary of Agence Française de Développement (AFD) focused on private sector development. It has been promoting sustainable economic, social and environmental development practices for 45 years. Proparco provides funding and support to both businesses and financial institutions across Africa, Asia, Latin America and the MiddleEast. Its actions focus on key development sectors including infrastructure (with a specific focus on renewable energies), agribusiness, financial institutions, healthcare and education. It aims to boost the contribution of the private sector to achieving the sustainable development goals adopted by the international community in 2015.

DEVELOPMENT FINANCE INSTITUTIONS: HOW TO OPERATE IN FRAGILE COUNTRIES?

The challenge of energy supply and energy bills in fragile countries : the example of Nigeria

Olivier Leruste, Managing Partner of Echosys Invest and co-founder of Echosys Advisory

Fragile countries like Nigeria have to contend with a high level of energy insecurity - a result of their many social, economic, security and health challenges. Energy supply solutions are limited for the private sector, and diesel generators are often used to replace a faulty or expensive electricity grid. Photovoltaic solar energy is a valuable alternative, however, its adoption is often delayed by regulatory uncertainty, unpredictable changes in grid prices and exchange rate fluctuations.

AN ARTICLE BY OLIVIER LERUSTE

Is Nigeria a fragile country? It is Africa's largest economy – bigger than South Africa and Egypt – with a population of 222 million, 37 billion barrels of oil reserves (Nigeria is Africa's No. 1 oil producer), mining reserves and an area of 924,000 square kilometres. With a variety of climates

(from the humid southern tropical coast, suitable for cocoa and palm oil, to the Sahelian savannah in the north and the central highlands where food and cereal crops are more readily grown), the country is an economic powerhouse with a massive domestic market, a broad industrial base, a business culture and quality management.

KNOWN IMBALANCES AND CONSENSUAL SOLUTIONS

The fragile nature of present-day Nigeria is attributable to the accumulation of overlapping and mutually-reinforcing problems to which the country is exposed. Insecurity, poverty, energy deficiency, corruption, a lack of infrastructure, a shortage of foreign currency and the related problems of a depreciating currency are challenges that seem impossible to resolve independently of one another.

And yet, there is general agreement among economists concerning the solutions. The

increase in Nigerian energy production thanks to improved security and massive but highly profitable investment upstream (oil and gas production), midstream (densification of the pipeline network), and downstream (modernisation of refineries), would reduce the balance of payments deficit, stabilise the currency, reduce energy prices, create jobs, boost the competitiveness of industry and, in so doing, boost national wealth and reduce poverty.

12 ANALYSIS

However, these interconnections can also work in the opposite direction. Because the security situation in the Niger Delta region is not improving, investment in onshore oil fields is being reduced, as evidenced by the recent decisions by Shell and TotalEnergies to divest some of their interests in onshore and shallow water oil fields. Nigeria has not reached the oil production quota allocated by OPEC (an average of 1.3 million barrels a day in 2023 1, increased to 1.5 million in November 2023). The country is struggling to get its natural gas to major centres of consumption. The gas is flared at a loss at oil production sites, while also releasing greenhouse gases. By failing to maintain and modernise the refineries operated by the national oil company NNPC, whose production has fallen from one year to the next, imports

The fragile nature of presentday Nigeria is attributable to the accumulation of overlapping and mutually-reinforcing problems to which the country is exposed.

of refined oil are increasing and weighing on the country’s balance of payments in dollars. The Nigerian currency, the naira, was devalued twice between June 2023 (-44%) and January 2024 (-39%) and it continued to lose value in February 2024. The private sector is directly impacted by this situation. The cost of a litre of diesel in Nigeria rose from 790 to 1,227 naira per litre between August 2022 and February 2024.

A HIGHLY NEGATIVE IMPACT ON AN UNSTABLE AND EXPENSIVE ELECTRICITY SUPPLY

The situation in Nigeria's electricity sector is symptomatic of the fragile nature of the economy. The 42 gigawatts of installed capacity generated by 22 million generators need to be compared with the 5.4 gigawatts supplied by the electricity grid. Private individuals, businesses and public authorities have to take the place of failing electricity distribution companies (DISCOs) by acquiring their own generators, which run for an average of 4 to 8 hours a day due to power cuts. The cost of this electricity, based on imported diesel and paid for in dollars, is more than 20 cents per kilowatt-hour. This cost fluctuates with the price of a barrel of oil, but crucially, it increases in local currency in proportion to the depreciation of the naira, a major headache for companies focused on the

domestic market and for private individuals whose income is not dollarised. How are Nigerian businesses coping in this environment? It's a daily challenge, as we learned from senior executives of Valentine Chicken in the agri-food sector, JMG in the capital goods assembly sector and Baze University in Abuja. Most of the equipment needed to produce electricity, particularly solar panels, is imported and paid for in dollars. Payment for these purchases is contingent on the availability of dollars from commercial banks, which try to secure allocations from the Central Bank of Nigeria (CBN). In June 2023, this critical situation led to the removal of the Head of the CBN, a devaluation of the currency and a floating exchange rate regime.

1 Source: OPEC, Report January 2024.

13 ANALYSIS

FOCUS

AFRIGREEN

Afrigreen Debt Impact Fund is a €100 million debt fund created by Echosys Invest and managed by RGreen Invest, a French portfolio management company. The Fund supports renewable energy projects in Africa, with a specific focus on commercial and industrial (C&I) solar power. Proparco, the EIB, IFC, BIO, FMO, Société Générale and BNP Paribas are the fund's main investors. The teams are based in Abidjan and Paris and began operating the Fund in April 2023.

ZIZ Energie is lighting up secondary towns in Chad

The electrification rate in Chad is very low: 6% compared with an average of 48% in sub-Saharan Africa. The grid is currently concentrated around the capital, N'Djamena. Decentralised energy is therefore a key national challenge. The Chadian company ZIZ Energie - which has been specialising in the development, construction and operation of mini-grids for 16 years - delivers clean, reliable renewable energy to households, administrations and businesses in secondary towns (an estimated 70,000 beneficiaries).

In 2023, Proparco granted a €1.5 million loan to this SME, which has over a hundred employees. This money is helping to electrify basic infrastructure that powers bakeries, universities and hospitals. The commercial and industrial (C&I) services ZIZ Energie intends to develop are helping to bolster Chad's industrial fabric. They provide the resources for launching a decentralised energy infrastructure aimed at developing, building and operating mini-grids in the country's secondary towns. This project, which qualifies as “100% climate mitigation”, should reduce the need for diesel generators, stabilise energy rates and reduce the population's energy dependency.

THE PRIVATE SECTOR ORGANISES ITS OWN ELECTRICITY SUPPLY

Nigerian companies can sign a power purchase agreement (PPA) with independent power producers (IPPs) specialising in photovoltaic solar power for commercial and industrial businesses (solar C&I). The constant fall in the dollar cost of photovoltaic panels and their installation is resulting in a cheaper alternative to the electricity grid and diesel generators, provided a commitment is made for 10 to 15 years at fixed prices indexed either to the dollar or to inflation. Nigerian regulations authorise these purchase contracts for businesses' own needs and they allow third parties to build and operate these private power plants.

However, a company's energy policy in Nigeria depends on a number of assessment criteria: anticipating grid prices set by the regulator, the number of hours of power cuts per day, the price of a litre of diesel in dollars and local currency, rates charged by IPPs for PPAs (which vary according to solar irradiance), availability

of the space required to install a photovoltaic power plant, the creditworthiness of the company and financing costs.

These factors, which influence decision-making, change very quickly and frequently - for example, changes in the dollar/naira exchange rate automatically increase the cost in local currency of a PPA billed in dollars. If an economic agent compares the rates charged by an independent producer with those of the electricity grid, this comparison becomes unfavourable for a PPA the day after a currency devaluation, especially as the Regulator tends to defer passing on primary energy supply costs in grid electricity rates. Similarly, the price of diesel consumed in generators is a function of the applicable taxes or subsidies, and economic agents necessarily bet on changes in public tax or subsidy policies. All of this affects and delays economic decisions in favour of renewable energies.

THE CHALLENGE OF ENERGY SUPPLY AND ENERGY BILLS FOR BUSINESSES IN FRAGILE COUNTRIES : THE EXAMPLE OF NIGERIA 14

Another determining factor in private sector energy strategy is expectations regarding electricity sector reform. In Nigeria, electricity distribution is entrusted to DISCOs, whose economic health varies from state to state. The reform of the electricity sector, ratified in June 2023 by the Tinubu government, plans to leave responsibility for the electricity sector to the states themselves. Uncertainty over the new regulations that will come into force in each state of the Nigerian Federation is encouraging certain players, rightly or wrongly, to opt for the status quo.

Private sector lack of visibility over the grid’s capacity to meet its requirements and the future cost of this energy is symptomatic of a fragile country like Nigeria – a characteristic encoun-

tered in most sub-Saharan Africa countries. The choices made in this uncertain environment will determine the margins of businesses over the coming years and affect their competitiveness. Introducing solar photovoltaics into the economic equation is a good thing because costs are lower than grid rates and generator costs in most circumstances, however, this is insufficient to trigger investment decisions and commitments given the uncertainty created by exchange rate fluctuations, regulatory action and national energy policy choices. To respond to this uncertainty as effectively as possible, financing institutions are reducing financing timeframes as much as they can and adapting their offers to private sector solar projects.

Nuru - moving towards clean and affordable energy in DRC

Nuru ("light" in Swahili), the company behind the Democratic Republic of Congo’s (DRC) first urban solar photovoltaic network, is a key player in providing access to clean, reliable and affordable energy for people in the east of the country, which is plagued by ongoing armed violence. In July 2023, Nuru closed a Series B equity financing programme of more than US$ 41 million. This fund will enable Nuru to step up implementation of energy projects with a total capacity of 13.7 MWp. These projects will significantly expand the company's existing operational facilities in eastern DRC and help to address the country's huge energy deficit.

The US$ 41 million in funding comes from market-leading equity investors including SFI, Global Energy Alliance for People and Planet (GEAPP, backed by the Rockefeller, Ikea and Bezos Earth Fund foundations), the Renewable Energy Performance Platform (REPP), Proparco, Voltalia and the Energy Access Ventures (EAV) and Gaïa impact funds. "Once you come here [to the DRC] and see the hunger for energy, the potential for growth, you can finally look past the risks and see what a transformative investment this will be, a real, genuine business opportunity," says Archip Lobo, co-founder of Nuru.1

The mission of Nuru and its investors is to help develop access to energy while diversifying and decentralising the DRC's energy mix, thereby supporting the aims of the Democratic Republic of Congo's National Strategic Development Plan in terms of renewable energy capacity.

1 Source: World Bank. A transformed fertilizer market is needed in response to the food crisis in Africa (2022)

THE CHALLENGE OF ENERGY SUPPLY AND ENERGY BILLS FOR BUSINESSES IN FRAGILE COUNTRIES : THE EXAMPLE OF NIGERIA

Supporting the agricultural sector in fragile contexts

Claire Fillatre, Head of Agribusiness division, Proparco Fariza Chalal, Investment Officer, Agribusiness division, Proparco Quentin Elie, Intern, Agribusiness division, Proparco

The financing needs of the agriculture sector in fragile situations are all the more significant as they are poorly covered by commercial banking services. However this finances are essential to support staple food production, contribute to the sustainability of producers’ incomes, structure local value chains and reduce dependence on imports. Nevertheless, the overlapping risks inherent to the sector and the different contexts constrain the mobilization capacities of development financial institutions

FOCUS PROPARCO

Proparco is a subsidiary of Agence Française de Développement (AFD) focused on private sector development. It has been promoting sustainable economic, social and environmental development practices for almost 45 years. Proparco provides funding and support to both businesses and financial institutions across Africa, Asia, Latin America and the Middle-East. Its action focuses on the key development sectors: infrastructure, mainly for renewable energies, agribusiness, financial institutions, health and education. Its operations aim to strengthen the contribution of private sector players to the achievement of the Sustainable Development Goals (SDGs) adopted by the international community in 2015.

The agricultural sector is an important support for formal employment, generating 80% of jobs in fragile context and represents a significant development vector. As a development institution, targeting the agricultural sector is particularly relevant. While it often serves as an initial entry point for private sector financing in these regions, financing agri-business also contributes to supporting food resilience among populations while enhancing their economic stability. By actively helping to structure supply chains, agribusinesses facilitate the integration of populations in rural areas and limit migration to urban centers. A

whole ecosystem is often created around plantations or processing plants, providing housing for workers and their families, as well as essential public services for community life (health centres, schools, etc.).

Moreover, climate risks, to which the agricultural sector is traditionally exposed, are more prevalent and cause proportionately more damage in fragile situations. The vulnerability of farmers is even greater as they have limited means to assess and adapt to these risks (in the absence of insurance solutions, for example). Given the overlapping risks, the role of development finance institutions (DFIs) such as Proparco is particularly important.

While it often serves as an initial entry point for private sector financing in these regions, financing agri-business also contributes to supporting food resilience among populations while enhancing their economic stability.

16 SPOTLIGHT

WHAT ARE THE PROBLEMS ENCOUNTERED?

Situated in high-security risk areas, often difficult to access, businesses face multiple constraints. The lead time for project appraisal is challenging to assess in advance. For example, the Sudanese conflict in 2023 halted Proparco’s activities in this region due to the destruction of infrastructure (including facilities which were essential to the execution of a project that was being vetted at the time). In Iraq and Yemen, the security situation has prevented on-site access, limiting teams’ ability to conduct their analyses and greatly impacting deadlines. Access problems have therefore made things difficult and discouraged consultants from travelling to the sites. More critically, the day-to-day operations of these businesses are hampered and their long-term viability is jeopardized. They encounter complex logistical problems (both in terms of procurement and distribution) and bear significant unavoidable “parasitic” costs. Businesses also face major challenges in attracting and recruiting relevant profiles willing to work in difficult regions, reducing their ability to establish satisfactory governance and build suitable management teams. The project sponsor – often the founder of the structure – is frequently on their own or with a very small team to implement the strategy and operations while managing interactions with the DFI.

Given the economic instability and heightened exchange rate risk (strong fluctuations, non-convertibility and non-transferability issues), the business environment is unsettling

Given

the economic instability and heightened exchange rate risk (strong fluctuations, non-convertibility and non-transferability issues),

the business environment is unsettling for investors.

for investors. Moreover, the weakness of central government financial resources leads to significant deficits in public infrastructure and excessively high taxation policies contribute to the development of the informal economy and parallel currency markets, thus placing countries in less virtuous cycles.

In addition, political instability means that public policies can vary enormously, creating considerable uncertainty, particularly regarding the regulations concerning the activities of counterparties or the treatment of foreign creditors (including DFIs).

In some countries, the usefulness of accepting collateral is questioned when the enforcement of court rulings is problematic and the chances of recovering debts relatively low –which further increases the risks of the project. Lastly, the limited choice of financial and legal advisers makes it difficult to appraise and complete projects. Auditors operating to international standards or business law firms prioritise large corporations, neglecting smaller companies, or they charge unfairly high rates.

17 SPOTLIGHT

AN ARTICLE BY CLAIRE FILLATRE

FARIZA CHALAL

Fariza Chalal joined Proparco in 2008 and is currently an Investment Officer in the Agribusiness Corporate Financing division. Previously in legal law firms and in-house legal team she has over 18 years’ experience of legal and financial structuring and private sector financing in developing countries.

QUENTIN ELIE

IN WHAT CIRCUMSTANCES ARE PROJECTS IMPLEMENTED?

In these complex situations, Proparco nonetheless manages to support projects, although unfortunately, the number and volumes involved remain well below the needs. For projects taken as a whole, the transformation rate remains low. Since 2016, of 25 projects identified for a total amount of around €280 million, only five have actually gone through for a total amount of approximately €50 million. Projects have more chance of succeeding in certain countries with a more developed and solid economic fabric and a more stable political climate, or when the borrowers are backed by large, geographical -

HOW CAN WE GET THINGS MOVING?

DFIs’ resources and conditions of intervention have historically diverted them from directly financing small structures (micro-businesses, SMEs) even though these represent the majority of formal agricultural players and carry long-term investment projects. The offerings of DFI’s must evolve to provide smaller amounts of funding on sustainable terms. It is in this sense that Proparco has aimed to adopt a specific strategic approach for fragile countries, focusing on the agriculture sector. It involves a specific approach to small, high-impact projects and deploying a suitably adapted technical assistance. This assistance, in the context of fragile countries or regions, has mainly benefited (directly or indirectly) the agro-industry sector over the past 10 years (31 projects).

DFIs face a major challenge: ensuring that the projects they support comply with international standards (IFC standards) when counterparties are already struggling to comply with local regulations.

ly-diversified groups with good track records (i.e. there is access to a company’s business history, providing an insight into its behaviour and capacity to adapt). For instance, IFC, FMO and Proparco have partnered with HSA Group, the largest private company in Yemen and one of the country’s main suppliers of staple foods. Building on this success, the IFD consortium has renewed its support by helping Tiryaki to strengthen food security in Iraq and to diversify the country’s economy. Collaboration between international players in supporting quality sponsors is therefore a major advantage.

This strategic positioning also involves revising the acceptable risk appetite and adapting the related tools. DFIs, including Proparco, must deal with realities that require a high level of pragmatism when applying their requirements. The have to contend with constant tension between the desire to reduce information and commitment demands from their clients and the need to identify and mitigate risks associated with their intervention. Indeed, DFIs cannot deviate from their prudential or accountability obligations when their shareholder base is predominantly public.

Blending and de-risking (even partial de-risking) can be used to raise capital for projects with high-impact but particularly high credit risk. The FARM (Food & Agriculture Resilience Mission) initiative, launched by France in 2022, is an important step in scoping numerous projects throughout Africa that are normally outside of Proparco’s scope. However, this is not enough. One of the obstacles to scaling up the agricultural sector in fragile situations is the cost of financing in local currency, which is often prohibitive because of costs incurred to protect against potential losses due to market risks (i.e., hedging costs). Yet solutions do exist, such as subsidising the interest rate charged to make debt servicing sustainable.

SUPPORTING THE AGRICULTURAL SECTOR IN FRAGILE SITUATIONS

In fragile countries, environmental and social risks are often higher, especially concerning land, working conditions, deforestation and pesticide use, etc. DFIs face a major challenge: ensuring that the projects they support comply with international standards (IFC standards) when counterparties are already struggling to comply with local regulations. Clearly, a longerterm approach is required. We need to accept a

HOW CAN WE BE MORE FLEXIBLE?

Our experience in accompanying projects in fragile contexts shows that the tools and standards applied by DFIs are not always flexible enough to make support truly effective. The burden of instructions and requests for information is often incompatible with the counterparty’s ability to respond. It is necessary to simplify the legal structure, guarantee mechanisms and contractual formalities.

In this respect, it’s worth mentioning the value of the IFC’s “upstream” approach, offering advisory services to help businesses structure in the upstream phase and make them “eligible” for DFI financing. Mention should also be made of the Africa Resilience Investment Accelerator (ARIA) initiative - see page 44 - launched by BII and FMO, in which Proparco is participating. This accelerator brings together DFIs to design and implement pragmatic strategies to support the private sector in fragile countries. In 2023, ARIA made it possible to vet and approve an investment project in Sierra Leone.

Proparco is also convinced of the significant leverage represented by developing partnerships with large major agro-industrial groups to structure agricultural sectors, by pooling technical, operational and financial expertise, together with environmental, social and governance (ESG) analyses.

slower progression curve for the counterpart, which may not achieve certain objectives or performance indicators until much later in the project life cycle. It is therefore necessary to find a balance to guide these companies toward better standards without imposing long and unrealistic action plans, given their more limited technical, human and financial resources.

The search for a balance between action, which carries a risk of negative impacts, and inaction, which preserves DFIs from contributing to these negative impacts, but deprives the countries concerned of positive impacts, is even more delicate fragile countries context.

Lastly, due to the strong accountability obligations, reputational risk is a sensitive issue for DFIs, leading them to abandon many projects. The question arises of allowing them to take more risk and tolerate a form of “right to make mistakes” in fragile and volatile situations. This could be considered by strengthening coordination with NGOs active in these regions, especially regarding ESG aspects.

The search for a balance between action, which carries a risk of negative impacts, and inaction, which preserves DFIs from contributing to these negative impacts, but deprives the countries concerned of positive impacts, is even more delicate in fragile countries context. Nevertheless, deployment of support to the agricultural and agribusiness private sector in such regions is a crucial issue, and Proparco, like many DFIs, is strengthening its capacity for intervention.

SUPPORTING THE AGRICULTURAL SECTOR IN FRAGILE SITUATIONS

FEFISOL II fund and Entrepreneurs du Monde: two complementary approaches in fragile contexts

Interview with Natasha Olmi, FEFISOL II fund portfolio coordinator, Solidarité Internationale pour le Développement et l’Investissement (SIDI), and Marie Ateba-Forget, Head of social microfinance, Entrepreneurs du Monde

The FEFISOL II fund - which supports rural microfinance institutions and agricultural structures - and the Entrepreneurs du Monde association - which works towards the social and economic integration of highly vulnerable people - are working in distressed parts of Africa. By financing and supporting microfinance institutions, agricultural structures and micro-businesses, and factoring in climate and environmental issues, both the Fund and the association are improving the living conditions of many vulnerable workers, enhancing food security and responding to emergency situations by adapting their actions to rapidly changing crisis environments.

WHAT IS THE STATE OF THE PRIVATE SECTOR IN THE FRAGILE COUNTRIES IN WHICH YOU OPERATE?

Marie Ateba-Forget: In the fragile countries where we work, the private sector is poorly structured and underdeveloped. Consequently, it generates very few salaried, formal jobs for the most vulnerable sections of the population. To earn a wage, these people must become self-employed. In Burkina Faso, the informal economy accounts for 91.8% of jobs1. In certain fragile countries, the situation has deteriorated sharply: in Myanmar, at least one person in the households we are working with used to have access to low-skilled salaried employment. A few months after the 2021 coup, these jobs had disappeared, making families even more dependent on self-employment. In these fragile countries, it is vital to support people who have become micro-entrepreneurs without really having chosen to do so, and who have no other short-term alternative for meeting their basic needs.

Natasha Olmi: Local contexts are generally complicated for the private sector structures we finance in Africa. For example, our partner Hekima, a microfinance institution (MFI) operating in the Kivu region of eastern Congo (DRC), has to contend with a social and economic environment degraded by several decades of conflict. The country’s governance is weak and the MFI operates in a complex and uncertain regulatory environment where microfinance does not always get a good press because of successive instances of fraud. In this region, Hekima offers quality services to economically active poor people, focusing especially on women entrepreneurs, who comprise 76% of its customers. SIDI and FEFISOL II provide this partner with financing and support.

Report of the International Organisation of Employers (March

2023).

20 FEATURE

WHAT IMPACTS DO YOU SEEK TO ACHIEVE OUT IN THE FIELD?

N. O: FEFISOL II is a fund focused 100% on Africa and, like its founders SIDI and Alterfin, we seek to reach places where others don’t really operate and to be as ‘incremental’ as possible. Our aim is to enhance financial inclusion of the most vulnerable people, far from financial services, especially women and rural dwellers. The aim is to positively impact 1.8 million active beneficiaries over the 12-year life of the fund, including over 50% in rural areas. As regards agri-food businesses, we are seeking to boost our partners’ commitment to the ecological and social transition of production processes. The aim is to positively impact over 70,000 smallholders, more than 70% of whom are certified organic or fair trade.

M. A-F: The political and security situation in Haiti, Myanmar and Burkina Faso has deteriorated sharply over the past three years. In these places, our immediate response is to maintain our presence to ensure continuity of service: savings, credit, training, cooking and lighting equipment, etc. Vulnerable families are hardest hit by these events and are having to contend with basic survival issues (i.e., security, food). We also need to adapt and increase the help we are providing, for example, by stepping up our support for male and female farmers who are the guarantors of food security. The European Microfinance Award won by Yikri in Burkina Faso is a brilliant illustration of this commitment. 2

WHEN YOU IDENTIFY NEW PROJECTS, WHAT DO YOU ANALYSE FIRST?

M. A-F: Entrepreneurs du Monde has long operated in the social microfinance sector. When we work with micro-entrepreneurs, all household expenditure and income is recorded and analysed. We found that energy costs (wood, charcoal, paraffin oil, battery-powered torches, etc.) were a major item (up to 25% of the total budget), so we developed social enterprises that provide access to clean energy. Similarly, we wanted to impact health costs – which have a major effect on the activities of beneficiaries – and we developed mutual health insurance schemes in partnership with the NGO ATIA. In fragile countries, we are currently working on food security issues.

N. O: The social and environmental impact thesis is key to our analysis: vision/mission, distribution of added value, governance, etc. We also focus on social and environmental risks, especially in the agricultural sector. If we identify a risk, we deploy a social and environmental action plan. Moreover, as a debt fund, we must conduct an in-depth, medium-term economic feasibility study: partners must have a viable validated business model so they can pay us back. We track our MFI partners on a monthly basis and, in more informal agricultural sectors, we monitor agricultural campaigns very carefully.

AN ARTICLE BY

MARIE ATEBA-FORGET

NATASHA OLMI

Given the amplification and overlapping of risks in Africa, we expect international financial backers to commit more to risk-sharing: to compensate for the low returns on small investments and the most fragile customers, hedging of risks (political, counterparty, exchange rate), first loss, etc.

2 See https://www.e-mfp.eu/european-microfinance-award-2023

21 FEATURE

FOCUS ENTREPRENEURS DU MONDE

Entrepreneurs du Monde is a not-for-profit supporting the social and economic integration of highly vulnerable people around the world and empowering them by helping them to become entrepreneurs, access energy and adapt to climate change. To achieve this mission, it creates and partners the development of social enterprises until they can become self-sufficient. By 2022, Entrepreneurs du Monde had worked with over 340,000 microbusinesses in 15 countries.

FEFISOL II

Building on the success of FEFISOL I, social investors Solidarité Internationale pour le Développement et l’Investissement (SIDI) and Alterfin launched FEFISOL II in June 2022. Managed by Belgium-based Inpulse, this debt fund is focused exclusively on Africa and finances rural microfinance institutions and agricultural structures. By supporting socially and environmentally sustainable practices, the fund (in which Proparco holds a stake through FISEA) aims to improve living standards and reduce inequalities.

MORE SPECIFICALLY, WHAT SORT OF PROJECT SUPPORT DO YOU GIVE?

N. O: Because technical assistance (TA) played such a big part in the success of the previous fund, SIDI decided to structure a new TA facility for FEFISOL II, financed by Proparco and BIO, the Belgian DFI. The support offered is based on the needs of our partners. In 2023, for example, the facility helped Gebana Togo, a Togolese SME exporting organic soya, to deploy the “inoculation” technique 3, which not only boosts the income of smallholders, but also encourages soya plant growth (a 20% increase in forecast production volume for 1,700 small producers), while naturally improving soil quality.

M. A-F: Our support consists in providing technical assistance and giving local teams the

resources needed to achieve operational autonomy (training, tools and procedures), financial autonomy (achieving financial breakeven) and institutional autonomy (incorporating entities under local legislation, introducing solid governance). But it also involves financial support in the form of grants to cover the operating losses of the first few years in loans and principal needed to roll out activities to a larger number of beneficiaries and enable people to change scale. Our incubation model enabled us to forge an entire ecosystem, because no investor was prepared to step in and help social enterprises that were not yet breaking even.

HAVE YOU ESTABLISHED ANY SPECIFIC LOCAL PARTNERSHIPS TO ENSURE THE SUSTAINABILITY OF YOUR FUNDING?

M. A-F: From the very beginning of a project, Entrepreneurs du Monde chooses a local structure – usually with corporate legal status – and provides it with long-term support (for around ten years) at every stage of its development. This support is both cross-functional (i.e., finance, social performance, governance, information and management systems, etc.) and ongoing, enabling the local team to be equipped, innovate, learn and develop their skills. Entrepreneurs du Monde plays a key role in the governance of the organisation and is guarantor of its social mission. This modus operandi helps reassure investors and, out in the field, the emergence of these social enterprises ensures the availability of sustainable services providing long-term support for beneficiaries. Lastly, in fragile countries, the stated independence of these private structures from the public sector is proving to be an important strength.

N. O: The FEFISOL fund builds on the partnerships forged by its founders, SIDI and Alterfin. We generally work with NGOs that support agricultural businesses in order to get a different perspective on the partner, which also helps to reduce counterparty risk - Nitidae4, for example, is one of our preferred partners out in the field. At the other end of the chain, we work with agricultural product buyers in Europe - especially with Ethiquable, a French cooperative specialising in organic fair trade products, with which SIDI has just signed a long-term strategic partnership.

3 The bacteria required for symbiotic fixation of atmospheric nitrogen by soya, which is absent from certain soils and must be added by means of inoculation at sowing time.

4 Nitidae is a not-for-profit that aims to improve how agri-food chains work while also helping to preserve natural resources in Madagascar, BurkinaFaso, Mozambique and Côte d’Ivoire.

FEFISOL II FUND AND ENTREPRENEURS DU MONDE: TWO COMPLEMENTARY APPROACHES IN FRAGILE AFRICAN CONTEXTS

HOW DO YOU SEE THE SITUATION DEVELOPING IN THESE HIGHLY VULNERABLE REGIONS?

N. O: The effects of climate change will undoubtedly be greater as we move forward. At the same time, access to energy - particularly clean energy - is likely to remain a major challenge. To meet this challenge, we want to equip our partners with renewable energy production plants and we are working to recover the organic by-products of processing (via pyrolysis of cashew nutshells, for example). We also support the production of organic and local alternatives to chemical inputs.

M. A-F: In the current international context, it’s hard to be optimistic. In the three fragile countries in which we work, we are preparing for long-term deterioration and working with local teams to try to adapt. The increase in extreme

poverty and food insecurity in three years is amazing, and we know the situation is likely to be compounded by new aggravating factors linked to climate change. In Burkina Faso, we are launching an experiment with displaced people in extremely precarious circumstances: we allocate them an income for a limited period and provide them with enhanced support to help them set up an income-generating activity. In Myanmar, we are considering introducing a food transfer system to facilitate access to basic foodstuffs at sustainable prices. In these three countries, we are stepping up our support for male and female smallholders who are the key players in food security.

WHAT DO YOU EXPECT FROM FINANCIAL BACKERS AND ARE YOU SEEING ANY NEW FUNDING “TRENDS” AMONG THEM?

N. O: Given the amplification and overlapping of risks in Africa, we expect international financial backers to commit more to risk-sharing: to compensate for the low returns on small investments and the most fragile customers, hedging of risks (political, counterparty, exchange rate), first loss, etc. This would enable a fund like FEFISOL II, dedicated to financing rural microfinance and family farm holdings, to expand its activities in these extremely fragile countries, by strengthening its mission and incremental value.

M. A-F: Because of higher interest rates, borrowing requirements are undermining the

business model of social enterprises, which are desperately trying not to pass on these costs to their beneficiaries, who are already highly vulnerable to inflation. At a time when recapitalising our social enterprises is becoming increasingly urgent, it is even more difficult to convince investors – even social investors – when it comes to projects located in fragile regions. Public financial backers must therefore acquire stakes in Solidarity Enterprises with Social Utility ( ESUS ) 5 in developing countries, providing terms and conditions that are compatible with their social mission and limited for-profit status.

FEFISOL II FUND AND ENTREPRENEURS DU MONDE: TWO COMPLEMENTARY APPROACHES IN FRAGILE AFRICAN CONTEXTS

See https://www.economie.gouv.fr/entreprises/agrement-entreprise-solidaire-utilite-sociale-ess#. Both of these businesses are labelled Finansol by FAIR: https://www.financerlasolidariteinternationale.org/

Financing MSMEs in crisis situations: ACME’s experience in Haiti

Sinior Raymond, Chief Executive Officer, ACME Marie Pascale Théodate, Director of Strategy, Marketing, Communication, Studies and Developement, ACME

It is essential to continue supporting micro, small and medium enterprises (MSMEs) in conflict zones, as they create both jobs and wealth however, credit financing means that financial institutions have to take on a very high level of risk, as the ongoing situation has a huge impact on loan repayment rates. However, solutions do exist, as illustrated by the experience of ACME, a Haitian microfinance institution (MFI).

With confirmation of a 5th consecutive year of contraction at the end of fiscal year 2023, the Haitian economy is now firmly entrenched in a cycle of economic depression, the consequence of a multidimensional-political, social, economic, humanitarian and above all security-related crisis. The violence intensified during the first quarter of 2024, negatively impacting the safety of citizens and all economic activity. According to the UN, the security crisis

in the Port-au-Prince metropolitan area and in certain provincial towns has reached “levels comparable to those in countries at war 1”. Political instability, the deteriorating security situation, the disruption of marketing channels and the resulting uncertainty are taking a heavy toll on economic activity. The private sector across all categories is investing little in this harmful environment, which is hampering the development of credit and businesses as well as job creation, and making it difficult to get the economy going again.

The key imperative in the midst of a crisis is to ensure the survival of private companies (and more particularly MSMEs) and to support them during periods of unrest so they can drive the economy forward and enable it to return to growth.

just allow Haiti to descend into chaos - France at the UN (delegfrance.org)

1 See: We cannot

24 FEATURE

IMPACT OF THE CRISIS ON THE SMALLEST BUSINESSES

90% of Haiti’s entrepreneurial fabric comprises micro, small and medium enterprises (MSMEs). These are deemed of strategic importance to the Haitian economy in terms of job creation and they also have great potential for wealth creation, in both rural and urban areas. But MSMEs are particularly vulnerable and are struggling to juggle between short-term survival and mediumand long-term growth strategies. The crisis has triggered a slowdown in their business and a drop in income and often leads to relocation or even closure, particularly when their goods are looted or they have to contend with kidnappings. The constraints that MSMSEs2 normally face are accentuated by this highly degraded situation. In such a difficult environment, risk management is crucial, as it severely restricts access to finance. We should note that women and young people under the age of 35 are the category of borrowers with the highest risk.

The key imperative in the midst of a crisis is to ensure the survival of private companies

(and more particularly MSMEs) and to support them during periods of unrest so they can drive the economy forward and enable it to return to growth. The main challenge in a fragile country experiencing violence is therefore to minimise survival risks. The multi-dimensional crisis has increased the needs of MSMEs exponentially and this affects different players, including financing structures.

To finance their businesses, Haitian MSMEs rely on the services of microfinance institutions (MFIs), their main partners for providing credit. MFIs are also exposed to increased risks, as they face major disruptions in an unstable environment. For the past five years, the entire non-cooperative Haitian microfinance sector has been affected. This can be seen for example in the Portfolio at Risk - 30 Days (PAR-30) of five MFIs, which jumped from an average of 8.71% in 2020 to 17.73% in 2023. The number of disbursements plunged by 40% over the same period.

RISK MANAGEMENT AMIDST SECURITY CRISES: THE EXAMPLE OF ACME IN HAITI

Like its counterparts, Action pour la Coopération avec la Micro Entreprise (ACME SA), an MFI with a portfolio comprising 95% micro entrepreneurs, is suffering the effects of an economy in crisis that is limiting opportunities for entrepreneurs. Contracting demand for credit from businesses is reflected in a fall in the number of active clients of ACME. In this fragile environment, ACME had to adapt to continue serving its target customers, particu-

larly by optimising management of the high risk inherent in loans granted to this borrower category. It is therefore necessary to factor in both the risks linked directly to the MFI and those hindering the provision of credit to MSMEs. ACME’s priority has always been to bolster its strategy in order to mitigate the occurrence and impact of risks – especially security, operational, financial and credit risks – without neglecting the impact of other risks.

AN ARTICLE BY SINIOR RAYMOND

MARIE PASCALE THÉODATE

Examples include limited knowledge of markets, undercapitalisation, low levels of human capital, lack of reliable accounting systems, lack of access to finance, risk management, etc.

25 FEATURE

In terms of security, very close monitoring of the situation has led the structure to adopt various measures, such as the temporary closure of four branches located in high-risk areas, requiring a reallocation of staff and customers. To strengthen the institutional framework, an Integrated Risk Management and Compliance Department has been set up. It plays a vital role in crisis situations, but above all in attracting savings from the general public, thereby encouraging Haitians to invest in maintaining and growing the local economy.

“Country risk” is closely linked to financial risk, in some cases limiting access to capital

ACME’s priority has always been to bolster its strategy in order to mitigate the occurrence and impact of risks – especially security, operational, financial and credit risks – without neglecting the impact of other risks.

to meet the demand for credit. Fortunately, in December 2021, ACME was accredited by Banque de la République d’Haïti (BRH, Haiti’s Central Bank) to act as a microfinance company. This new status authorises it to provide other financial services, including savings and term deposits. Access to customer deposits has reduced financial costs. Moreover, savings on certain items of expenditure have helped to reduce costs. ACME has placed particular emphasis on communication (for example, by improving Internet connectivity) to ensure that information is available in real time throughout its network. Other measures taken by ACME include a review of the credit application vetting process to assess the risk and financial capacity of the prospect more effectively as well as closer customer monitoring. Also, with a view to mitigating risk, the microfinance company has developed a new approach to agricultural credit that factors in the risk profile of farmers more effectively as this varies from one customer segment to another.

THE ROLE OF TECHNICAL AND FINANCIAL PARTNERS IN SECURING FINANCING FOR MSMES

The situation in Haiti requires a sustained commitment from technical and financial partners (TFPs) to get through this difficult period. Their role is an essential one and may consist of direct support for MSMEs through capacity-building programmes - i.e., technical support and training - to tackle the main constraints identified previously and, above all, to improve their resilience to crises. It can also support the financial institutions that actually fund MSMEs.

To optimise risk management for MSMEs, one of the preferred options is to set up guarantee funds, which provide a specific response to credit risk, i.e. the probability that customers will not repay their loans, especially when they do not have sufficient guarantees. Continuing a relationship with Agence Française de Développement (AFD) that dates back over twenty years, Proparco has been a partner to ACME since 2013, and in 2023 granted it a portfolio

guarantee that is proving particularly useful in expanding the range of services provided to MSMEs operating in a context of vulnerability and impoverishment. By granting this type of guarantee, financial backers can help create more structural and less volatile growth in the MFI portfolio and, at the same time, encourage risk-taking among the most vulnerable categories of borrowers, such as women and young people, with a view to fostering financial inclusion. In addition, a “positive discrimination” strategy could be applied to benefit manufacturing companies that have high growth potential but are more vulnerable, with the aim of strengthening Haiti’s productive fabric and creating wealth and sustainable jobs. With this type of initiative, donors agree to assume part of the risk of non-payment on loans granted, borne by the MFI. This guarantee can take the form of risk sub-participation ranging from 50% to 80%, for

FINANCING MSMES IN CRISIS SITUATIONS: ACME’S EXPERIENCE IN HAITI

eligible loans that will be included by the MFI in the sub-participated portfolio.

While the supply of financial services to the Haitian informal sector has definitely improved over the past 30 years with the emergence of non-cooperative-based microfinance institutions, it is also necessary to recognise certain limitations in this supply. MSMEs use the services of MFIs, most of which offer short-term loan solutions at higher interest rates than those charged by the traditional banking sector, because of the risk involved. This situation is especially restrictive for SMEs, whose financing needs are greater and spread over much longer periods. In addition, the credit supply and demand mismatch is more obvious for companies involved in production – more specifically in agriculture – and this is also the case for businesses operating in the renewable energy sector or in technological innovation. It would therefore be worthwhile for technical and financial partners to help facilitate

access to long-term financing, so that MFIs can provide loan products that are better adapted to the needs of these categories of business.

We cannot conclude without highlighting the positive relationship that exists between economic growth and technology-based innovation. As such, it would be worthwhile for financial backers to set up innovation support programmes using different forms of funding.

The challenge of ensuring the survival of MSMEs in a fragile and violent country is part of a global strategy involving a range of players. This is where the role of international donors is crucial: they can play a role on several fronts, in particular directly with MFIs, the main partners of MSMEs. The funds made available by donors can help with more structural and less volatile growth in the loan portfolio, while bolstering the action of MFIs resolutely focused on the well-being, economic empowerment and prosperity of their clients.

While the supply of financial services to the Haitian informal sector has definitely improved over the past 30 years with the emergence of non-cooperative-based microfinance institutions, it is also necessary to recognise certain limitations in this supply.

FOCUS

ACME

Action pour la Coopération avec la Micro Entreprise (ACME SA) is a Haitian microfinance operator offering financial services - credit, savings, term deposits and foreign exchangeto individuals and businesses. It grew out of the non-profit, Association pour la Coopération avec la Micro Entreprise (ACME), which was set up in 1997 and transferred its credit operations to the company in 2009. Through its 29 branches in 7 of Haiti’s 10 geographical departments, it serves nearly 20,000 customers, 62% of whom are women. ACME is now one of Haiti’s three largest microfinance organisations in terms of loan portfolio size and number of customers.

FINANCING MSMES IN CRISIS SITUATIONS: ACME’S EXPERIENCE IN HAITI

Understanding vulnerabilities for more effective action in fragile contexts

The OECD defines fragility as "the combination of exposure to risk and insufficient coping capacities of the state, system and/or communities to manage, absorb or mitigate those risks". Working in a country in a fragile situation requires an understanding of these multidimensional vulnerabilities.

39 fragile countries identified by the World Bank

This list of fragile countries –updated annually by the World Bank - distinguishes between countries based on the nature of the problems they face (conflicts or social and institutional issues), to facilitate differentiated approaches, policies and instruments.1

Countries in a situation of conflict: Afghanistan, Burkina Faso, Cameroon, Central African Republic, Democratic Republic of Congo (DRC), Ethiopia, Iraq, Mali, Mozambique, Myanmar, Niger, Nigeria, Somalia, South Sudan, Sudan, Syria, Ukraine, West Bank-Gaza, Yemen

Countries experiencing social and institutional fragility: Burundi, Chad, Comoros, Congo-Brazzaville, Eritrea, Guinea-Bissau, Haiti, Kiribati, Kosovo, Lebanon, Libya, Marshall Islands, Micronesia, Papua New Guinea, Sao Tome and Principe, Solomon Islands, Timor-Leste, Tuvalu, Venezuela, Zimbabwe

1 Two reference lists are commonly used to define fragile contexts: the OECD and World Bank lists.

Sources: Classification of Fragile and Conflict-Affected Situations, World Bank (July 2023)

• OCEANIAAND PAC I F I C OCEANISLANDS •

28 KEY FIGURES

Complex, multidimensional fragility

Fragility can be measured across six dimensions

Fragility

Source: States of Fragility 2022 – OECD

Glossary

Development assistance

Development assistance - often referred to as Official Development Assistance (ODA) - comprises the funding provided by public bodies in countries with the specific aim of promoting economic development and improving living conditions in developing countries. ODA consists of grants or low-interest loans to finance programmes to improve access to drinking water, healthcare, electricity, schools, decent housing and a clean environment.

Blending

Blended finance is the strategic use of development finance for the mobilisation of additional finance towards sustainable development in developing countries. It attracts commercial capital towards projects that contribute to sustainable development, while providing financial returns to investors. This innovative approach helps enlarge the total amount of resources available to developing countries, complementing their own investments and ODA inflows to fill their SDG financing gap, and support the implementation of the Paris Agreement.

De-risking

De-risking instruments can be applied to reduce risks faced by project sponsors and improve risk/reward balance. Where risks are too high or returns too low, concessional resources can help alter the risk-return profile, enabling investors including the development financial institutions

Source: AFD / OECD / OCHA / IFC / FEM

(DFI’s) to participate. By alleviating residual constraints, Blending Finance unlocks a DFI’s financial and non-financial additionality, and enables impactful investments to proceed.

Fragility

Fragility is the combination of exposure to risk and insufficient coping capacities of the state, system and/or communities to manage, absorb or mitigate those risks. The concept of fragility tends to focus on the socio-political determinants of crises, stressing in particular the role of institutions, political instability and conflict on development trajectories. Fragile contexts affect a quarter (24%) of the world's population, but three quarters (73%) of those living in extreme poverty throughout the world.

The humanitarian-developmentpeace nexus

This is an integrated approach involving humanitarian, development and peace actors. It promotes better co-ordination, coherence and complementarity between actors and initiatives to respond to shortterm humanitarian needs, while also responding to the root causes of conflict and vulnerability and strengthening the individual and community resilience of vulnerable people. This enhanced coordination of shared responsibility is designed to leverage the comparative advantages of the various players within the strict framework of their respective mandates, and based on the specific project context.

Upstream

The upstream approach helps to create the right conditions for private investment in complicated economic situations by improving the operating environment for private companies. Upstream activities take place in advance of the traditional investment cycle and act as levers for attracting capital. This work can involve identifying public sector reforms that would unlock more private investment, strengthening the technical capabilities of companies, or improving the structuring of projects that will be proposed to potential investors.

Vulnerability

Vulnerability to crises and conflict is defined as the propensity of a society, an institution or a population to suffer the negative consequences of a crisis. Three risk factors are distinguished: exposure to the shock, sensitivity to its impact and capacity to adapt.

Security Human

Social Politics Economic Environmental 29 KEY FIGURES

The private sector in fragile contexts

The private sector plays a crucial role in degraded contexts. It helps with job creation, economic investment, the supply of essential goods and services, innovation and adaptation to climate change. However, it cannot assume all the responsibilities of the public sector. A partnership-based and coordinated approach is needed to achieve sustainable results.

The need for private sector investment in fragile contexts

These investments - coupled with public sector investment - make it possible to:

Provide essential goods and services (including access to electricity)

Access to finance

Sources: World Investment Report, UNCTAD – 2023 / World Bank / TheGlobalEconomy.com

Less than 2% of foreign direct investment

Support the agri-food sector

Support employment

The least advanced countries attract less private investment than other developing countries and therefore have more difficulty developing their private sector.

US$ 1,294 billion in foreign direct investment invested internationally

Sources: World Investment Report, UNCTAD – 2023 / World Bank / TheGlobalEconomy.com

Investing in fragile contexts: a priority for Proparco

In 2023, Proparco's commitments in fragile countries will total O/W:

Only US$ 22 billion for the least advanced countries

Source: Department

financial institutions: Renewable energy: > €300

Agri-business

nearly

over €1.7 billion > €600 million Banks &

million

& agriculture:

€200 million

30 KEY FIGURES

The private sector in high risk security situations: the examples of Lebanon, Iraq and Jordan

In conflict-affected countries and adjacent countries such as Jordan1, a deterioration in the security situation generates a high level of economic instability that exacerbates the bad business climate and labour market. In these contexts, the private sector can provide solutions, especially by supporting the small business ecosystem and financing essential infrastructure (energy, telecoms, etc.).

Obstacles to business

Direct and indirect consequences of the deteriorating security situation on the economies of countries in crisis.

At country level:

Political instability, corruption, competition from the informal sector, poor access to finance

Regional consequences on the labour market

At business level:

Business management practices, lack of investment in employees, decline in innovation and digital transition

Source: Unlocking Sustainable Private Sector Growth in the Middle East and North Africa: Evidence from the Enterprise Survey (eib.org)

Source: World Bank

The VSE/SME ecosystem to underpin the economy

Small and medium-sized businesses are a major source of jobs in the formal sector.

OF SMES IN THE FORMAL PRIVATE SECTOR

Source: IMF (2019), Enhancing the Role of SMEs in the Arab World – Some key considerations, Policy note No.19/040, Washington D.C., based on World Bank Enterprise Survey data.

PROPORTION

1 Jordan has the second highest number of refugees per capita in the world. In 2024, this country of 11 million people hosted more than 1.3 million refugees. The vast majority were Syrian nationals and around 77,300 came from other countries. (Source: ACAPS) UNEMPLOYMENT RATE FROM 2010 TO 2022 Jordan 19.2% Iraq 15.3% Lebanon 11.7% 20% 18% 16% 14% 12% 10% 8% 6% 2010 2012 2014 2016 2018 2020 2022 2010 - 2011 Withdrawal of American forces from Iraq 2011 Start of Civil War in Syria 2020 Explosion in the port of Beirut NB: between 46% and 51.5% of the active population in these countries do not have an employment contract. 55% 43% 90% Iraq Jordan Lebanon 31 KEY FIGURES

FISEA: venture capital for fragile countries

Charline Jan, Principal, Proparco

Facilité d’Investissement et de Soutien aux Entreprises en Afrique (FISEA - Facility for investing in and supporting African business) is one of the first venture capital investment initiatives set up by AFD Group to support fragile countries. It was launched in 2009 and topped up in 2021 as part of the Choose Africa initiative. The initiative currently totals €490 million, part of which is earmarked specifically for investments in fragile countries .

AN ARTICLE BY CHARLINE JAN

FISEA was originally allocated an investment capacity of €250 million euros as part of an ambitious strategy to support the development of Africa’s SME fabric. The initial aim was to help create or maintain 100,000 jobs throughout the Continent. This initiative,

supported by Agence Française de Développement (AFD), promotes a general approach, aimed at supporting sectors with high growth and human development potential in Africa. It currently has an investment capacity of €490 million and is fully aligned with the objectives of the Choose Africa initiative.

A FACILITY TAILORED TO FRAGILE AND LOW-INCOME COUNTRIES

Just like Proparco’s equity investment activity, FISEA has opted for two investment methods: intermediation, via investment funds, and direct investment in African businesses. Investments in private sector businesses must be profitable –this is an essential criterion that helps confirms the success and sustainability of the investments financed. However, while certain sectors or projects are potentially profitable, they may have

risky profiles or delayed returns that make financing by the private sector, or even by development finance institutions such as Proparco, quite tricky. This is particularly true in less-developed regions caught up in conflict or post-conflict situations, with a destabilised or gradually stabilising political or macro-economic framework that can be collectively termed “fragile states”.

From the outset, FISEA’s activity was positioned on riskier operations than usual, either because of the size of the business or the maturity of the project,

institution or country in question.

32 CASE STUDY

From the outset, FISEA’s activity was positioned on riskier operations than usual, either because of the size of the businesses or the maturity of the project, institution or country in question. It was therefore designed to round out the activities of AFD and Proparco by supporting private players developing innovative, high-impact projects - while opening up new investment horizons. FISEA sought out new types of partners and investment opportuni-

ties that differed from the traditional business pipeline – sometimes lacking in visibility and far removed from the processes of creating loans, mortgages or financial instruments - while also providing customised technical support. This dual investment offering was an important differentiating factor for AFD Group and enabled it to go further in developing and supporting the African private sector.

ANALYSING THE FIRST INVESTMENT PHASE

In 2019, ten years after the initiative was launched, a study conducted by the firm of Steward Redqueen assessed the impact of FISEA in terms of its initial ambitions. The report highlights the difficulties encountered in achieving significant exposure in fragile countries. Nevertheless, 32% of FISEA investments were channelled into low-income countries 1 and 14% into fragile states.2 Although these levels are higher than the relative percentages of private equity flows captured by these countries3, a larger contribution might have been expected, given the importance attached to this theme in FISEA’s strategy. This highlights the challenge involved in coming up with sufficient investment opportunities in these markets, while maintaining an acceptable level of risk in relation to the financial performance targets set by AFD.

Moreover, while 32% of FISEA’s capital was used to support businesses from “low-income countries”, these accounted for almost 50% of the structures of FISEA investees. This

means that companies in these countries were smaller on average, and that support for small and very small businesses was much greater. By contrast, the 14% of capital invested in “fragile states” represented only 11% of the businesses supported by FISEA. The African Rivers Fund (ARF), managed by XSML, invested in debt, with investments starting from $100,000. This $50 million fund supports micro businesses and SMEs, mainly in the Democratic Republic of Congo. It provides entrepreneurs - often from disadvantaged backgrounds - with access to capital.

To assess the facility’s “geographic additionality”, Steward Redqueen compared FISEA investments with global private equity flows to African countries, such as those tracked by the African Venture Capital Association (AVCA). For almost 70% of the “fragile or low-income countries” for which data was available, FISEA was more exposed than the market, in terms of amount invested – and in several cases, considerably more exposed (e.g., Malawi and Madagascar).

1 In this report, “low-income countries” correspond to the World Bank Country Income Classification. 2 “Fragile countries” in the report refer to the World Bank’s “fragile states” (World Bank Harmonised List of Fragile Situations). 3 Comparative analysis of investments on the continent calculated by The African Private Capital Association.

33 CASE STUDY

THE IMPORTANCE OF QUALITY DUE DILIGENCE

An analysis of the ten-year financial returns on these investments showed that the best latent financial performances in the FISEA portfolio were in Senegal where two large-scale projects boosted its performance, nicely demonstrating the existence of “bankable” opportunities in less advanced economies. Conversely, Namibia, Tanzania, Rwanda and Zambia did not perform as well. However, it should be stressed that these investments were made by the managers with the worst

FROM FISEA TO FISEA+

With the benefit of these lessons, AFD and its line ministries decided to focus the strategy of the new phase of the initiative known as FISEA+ on more explicit and increased (direct and indirect) support for small and medium-sized enterprises operating in fragile countries. These now represent one of the facility’s four priority investment targets. 4 Along with its partners (investment funds, entrepreneurs and local banks), Proparco has observed that micro, small and medium-sized businesses (MSMEs) have difficulty accessing local financing in the most fragile regions. This

financial performance records in the FISEA portfolio. The financial returns on these investments were therefore influenced more by the quality of the management teams and investment strategies than by country-specific risks. This finding underlines the importance of the quality of due diligence within the investment process and of risk management in complex environments.

is due both to the risk-taking capacity of local banks, and to the fact that MSMEs’ balance sheets are not considered sufficiently robust (in terms of equity) to be able to carry senior short-term financing. Also, local bank financing conditions do not always match the needs of small local businesses (especially in terms of maturities). To consolidate their balance sheets and access facilities that match their financing needs, these businesses have to open up their capital or use debt funds such as those that FISEA invests in (ARF, FEFISOL, BPI).

AFD and its line ministries decided to focus the strategy of the new phase of the initiative –known as FISEA+ on more explicit and increased (direct and indirect) support for small and medium-sized enterprises operating in fragile countries.

FISEA: VENTURE CAPITAL FOR FRAGILE COUNTRIES

4 Along with support for SMEs, social enterprises and start-ups specializing in digital innovation.

Since 2021, FISEA+ has invested in countries such as the Democratic Republic of Congo, the Palestinian Territories, Sierra Leone and Madagascar. The revamped facility may be used – for limited amounts – in growth capital funds that invest specifically in the fabric of local micro businesses and SMEs, or in venture capital funds that provide pre-seed or seed capital. FISEA+ may also support initiatives that have a strong catalytic impact by setting up “junior tranches” in funds as a complement to “senior tranches”, to encourage established fund managers to invest in new strategies and geographies, while seeking to raise more capital for businesses in the most fragile countries. The

technical support included in FISEA+ is designed to provide expertise and know-how tailored to the needs of fund managers and MSMEs. FISEA+’s investment credo, in phase with the Choose Africa initiative, is to continue to support the fabric of African MSMEs and to seek out projects with greater impact and eligibility criteria that complement AFD Group’s other instruments, particularly Proparco’s balance sheet. Ultimately, this strategy is designed to consolidate the economic and social impact of the initiative, while providing venture capital in fragile countries where it is most needed and can have the highest multiplier effect.

FOCUS PROPARCO

Proparco is a subsidiary of Agence Française de Développement (AFD) focused on private sector development. It has been promoting sustainable economic, social and environmental development practices for 45 years. Proparco provides funding and support to both businesses and financial institutions across Africa, Asia, Latin America and the Middle-East. Its actions focus on key development sectors including infrastructure (with a specific focus on renewable energies), agribusiness, financial institutions, healthcare and education. It aims to boost the contribution of the private sector to achieving the sustainable development goals adopted by the international community in 2015.

Bank of Palestine, a private institution in a conflict zone

The Bank of Palestine (BOP) is a key player in financial inclusion. The Bank was founded in Gaza in 1960 by the Shawa family and is a leader in banking services for women and in financing the battle against climate change. BOP is a financial group with several subsidiaries. It is a systemic bank with approximately one-third of the total Palestinian market for credit facilities and deposits. It serves nearly a million customers through its 73 branches across the Palestinian territories. Proparco acquired a stake in BOP in 2021 with the aim of strengthening the flow of financing to local SMEs.

Since the start of the war in Gaza, BOP has continued to serve its customers despite the destruction. In conflict situations, the financial sector remains active and ready to intervene on the ground. The Bank plays a key role as its position enables it to channel financing to support the private sector. Provided it gets enough support from DFIs, BOP should be able to ensure the recovery of a dynamic private sector once hostilities cease.

In fragile and conflict situations, providing equity to local financial intermediaries is an effective way of supporting the local ecosystem. These injections of equity are powerful albeit limited resources in markets where international investors are rare. As well as boosting financial additionality, the participation of these investors often tempts their counterparts to invest in the Bank’s capital, raise standards and exert influence on boards of directors.

FISEA: VENTURE CAPITAL FOR FRAGILE COUNTRIES

How to invest responsibly in fragile and conflict-affected settings?

Josie Lianna Kaye, CEO, TrustWorks Global Benjamin Miller, Senior Advisor, TrustWorks Global

Fragile and Conflict-affected Settings (FCS) may be characterized by illegal armed groups, organized crime and violence, ethnic and sectarian tensions, inapt land tenure regimes, corruption, and interwoven legal, informal, and illicit economies. In such a setting, investment, job creation and economic growth may not by themselves mitigate conflict and fragility or make societies more peaceful and stable. Investors who do not account for these characteristics of FCS may inadvertently sustain the very forms of fragility and conflict that they hope to transform. Conflict-sensitive approaches are, therefore, imperative. 1

FOCUS TRUSTWORKS GLOBAL

TrustWorks is a Geneva-based social enterprise comprising peace and conflict experts in responsible business and investments in conflict contexts. With over ten years of experience working with companies and investors, it focuses on heightened human rights due diligence and conflict-sensitive business/investment in some of the world’s most challenging contexts. As a boutique social enterprise, TrustWorks operates in a nimble, discrete and constructive manner, and its team has experience working in over 70 FCSs

Investments deliver various benefits, but also harm and disadvantages by creating ‘winners’ and ‘losers’. Where the winners and losers are groups experiencing social and political tensions or conflict, or have shared histories of intergroup violence, investments can drive conflict, making violence more likely, widespread, or sustained. Investments may sustain conflict if they are captured by ‘bad actors’, either directly or indirectly, through extortion, misappropriation, or bribe-seeking behaviour. ‘Bad actors’ might include armed non-state groups, criminal

organizations, and actors within government in cases where states are undemocratic, chronically abusive towards sections of the population, or captured by self-interested or sectarian elites. Individuals within such entities may have legitimate, formal business interests that are or become tied to, or used to finance, illicit and/or violent activities. When DFIs invest in FCS, it is imperative to avoid driving social and political impacts. However, if DFIs account for these risks, then they may also have positive impacts on local dynamics of conflict, fragility, and violence.

WHAT KIND OF STRATEGY SHOULD A DFI ADOPT?

In FCS, positive impacts on peace and stability do not occur as incidental consequences of investment. Rather, they result from deliberate, tailored strategies for impact on peace and stability. Of course, DFIs are not obligated to ‘target’ peace and stability; job creation and livelihoods, pursued in conflict-sensitive ways, are perfectly legitimate strategic objectives. In FCS, DFIs have important options to consider and choices to make.2

Strategic decisions to address drivers of fragility and/or peace and stability have consequences for the type of projects that are selected, the partners that are engaged, the manner in which projects are implemented and the ways in which impacts are measured. Due to the risks to the investor and the risks that the investor poses to the context, conflict sensitivity must underpin the approach, regardless of the strategy selected.3

1 Conflict-sensitivity in development finance aligns with the expectations of the private sector relative to heightened human rights due diligence, see for example: International Finance Corporation, 2019. Generating Private Investment in Fragile and Conflict-Affected Areas. Washington, D.C. and, the UNWG, 2020. Business, Human Rights, and Conflict-Affected Regions: Toward Heightened Action. New York. 36 ANALYSIS

Structures and processes that govern DFIs’ activities in FCS should reflect their strategic goals and objectives. Internal accountability, incentives, and processes should reflect the organization’s mandate for particular target outcomes. This might mean that personnel working in FCS have the competencies to understand conflict analyses and are able to grasp the likely social and political effects of the projects that they manage; that they

have KPIs that prioritize strategic outcomes more highly than, or as highly as investment outflows and ROI; and so on. Analyses of conflicts should predicate projects and their design; analysis of a project’s likely impacts on conflict should predicate project re-design. Internal learning mechanisms should enable organizational and practical changes in response to both positive and negative social and political outcomes.

WHAT KIND OF PARTNERSHIPS SHOULD DFIS BE FOSTERING?

In FCS, two types of collaborations should be considered by DFIs. The first is complementarity with other DFIs: those working in the same contexts should collaborate to foster conflict-sensitive approaches, through the pooling of resources for analytical work and support for implementation of conflict-sensitive practices. This will foster synergies and prevent competition and working at cross-purposes. The second concerns project partners and intermediaries. Investing to address fragility and conflict requires addressing the underlying social and political problems that sustain fragility and conflict. In

most cases, these issues lie beyond the private sector. To this end, DFIs may need to work with international, regional, national and local actors that have positions, competencies, networks, and mandates that DFIs may not have, aligning and coordinating their efforts with those of other actors. Such actors can be instrumental in navigating investments in complex environments, mobilising local support, establishing community-level governance structures, facilitating dialogues about contentious issues, and so on. Managing these aspects of project ‘externalities’ requires local knowledge, networks and influence.

HOW SHOULD A DFI MEASURE ITS IMPACT?

Monitoring and evaluation should be designed to assess the effectiveness of discrete projects in advancing the DFI’s strategic goals. If the strategic aim is to strengthen peace and stability, the DFI should assess the impacts that its interventions are having on peace and stability. Due to the complex nature of conflict and the difficulty of establishing causality, assessing impacts on peace and stability can be challenging. Appropriate approaches entail broad engagement with a diverse range of stakeholders, to understand their perceptions of the investment and its effects. This, in turn, requires robust and trust-based partnerships with local actors who can facilitate meaningful processes of stakeholder engage -

ment at key moments in the project. Moreover, FCS are highly dynamic and often volatile, with conditions that can change suddenly and dramatically. Conflict-sensitivity entails maintaining an understanding of a project’s impacts on the context, even as the context itself changes. This requires integrating impact assessment into ongoing monitoring processes and adapting aspects of the investment to the changing context. By working in this highly adaptive manner that is attuned to the local context, DFIs can improve their ability to minimise the negative and maximise the positive impacts on fragility, peace and stability.

AN ARTICLE BY JOSIE LIANNA KAYE

BENJAMIN MILLER

Benjamin is a Senior Advisor at TrustWorks and an expert on conflictsensitive business operations, business and conflict/peace, and business and human rights. He has worked with companies in the oil and gas, mining, construction, renewable energy, and fast-moving consumer goods industries, and in more than 25 countries, including conflict-affected states such as Burundi, Colombia, and Nigeria. Ben is currently participating in a multiyear research project on small and medium enterprises in violent, urban contexts.

TrustWorks Peace Finance Framework for DFIs outlined in an interactive model here: https://peacefinance.trustworksglobal.com/

See: Africa Resilience Investment Accelerator, ‘Conflict sensitivity in projects, practical measures for private sector clients’, ARIA with the International Finance Corporation and the European Investment Bank, March 2023. 37 ANALYSIS

2 See

At the forefront of the humanitariandevelopment-peace nexus, the International Committee of the Red Cross

Interview with Juan Coderque, Senior advisor on Innovative Finance, Humanitarian Innovative Finance Hub and the International Committee, ICRC

Together with development agencies and the private sector, the ICRC explores innovative partnering and financing solutions at the humanitarian-development-peace nexus in fragile and conflict-affected settings.

WHAT IS THE ICRC’S ROLE IN FRAGILE CONTEXTS, AND WHAT IS THE ADDED VALUE OF THE PARTNERSHIPS SET UP WITH DEVELOPMENT PLAYERS SUCH AS AGENCE FRANÇAISE DE DÉVELOPPEMENT?

The ICRC’s mandate is to provide protection and assistance to people and communities affected by conflict. Its neutrality, impartiality, and independence enable it to access conflict-affected settings. In multi-crisis contexts, collaboration between the ICRC and development actors such as the French Development Agency (AFD) is based on complementarity. The ICRC aims to increase the resilience of populations, support local authorities and ensure sustainable impact. Within the humanitarian-development-peace

(HDP) approach, the partnership between the ICRC and AFD enables responsible exit strategies (design, finance, implementation) from humanitarian contexts. It also allows stakeholders to remain engaged in these environments, in case conditions deteriorate. In this nexus, the ICRC and AFD have developed innovative approaches for access to water, healthcare, and economic opportunities, notably in Iraq, Lebanon, and Mozambique.

38 INTERVIEW

WHAT IS YOUR ASSESSMENT OF THE LOCAL PRIVATE SECTOR IN THE AREAS WHERE THE ICRC OPERATES?

While the needs in every war-torn country vary greatly, one thing is true everywhere: the private sector and local actors are much quicker in responding than any international organization on its own. However, it is also true that the most vulnerable are often excluded from productively participating in local markets. Acknowledging both realities is central to how the ICRC approaches its work to improve people’s ability to generate income for their families. Further on this point, when it comes to the economic security of affected populations, the ICRC has a dual approach: focusing on the household level by helping vulnerable families to (re)start income generating activities and intervening at the systems level by working to improve the functioning of – and people’s access to –local markets. Both approaches are rooted in a thorough analysis and knowledge of the local

markets, and build on a consistent interaction with the local private sector. In doing so, the ICRC avoids doing harm by mitigating the risks of market distortion but also leverages the comparative advantage of the local private sector to multiply positive outcomes for the community. For example, at the ‘household-level’, the ICRC targets vulnerable people with grants to start small businesses and to pursue vocational training, contributing to addressing the skills gap of local businesses 1. At the systems-level, an example is storage facilities collapsing as a result of conflict, disrupting agrifood value chains, and forcing small-holder producers to sell their produce locally at harvest time, pushing down prices. By investing in re-establishing cold chain infrastructure, the ICRC can help producers expand their access to markets and increase their revenues.

HOW DOES THE ICRC WORK WITH THE PRIVATE SECTOR, AND WHAT ARE ITS OBJECTIVES?

Modern humanitarian action – the Geneva Convention, International Humanitarian Law, the ICRC and the wider International Red Cross and Red Crescent Movement 2 – resulted from Swiss entrepreneur Henry Dunant stumbling onto the Solferino battlefield the day after the battle, in June 1859. There, thousands of Italian, Austrian and French soldiers lay dead, dying or wounded, with very limited care. On his return to Geneva, he wrote A Souvenir of Solferino 3 The Geneva business community supported Dunant’s efforts, and the private sector has continued to play a key role since the inception of the “Red Cross”.4

The private sector is a critical source of funding for the Red Cross Red Crescent Movement. Beyond resource mobilisation, the ICRC and its Movement partners engage the private sector via procurement, collaborative approaches and humanitarian dialogue. We also support people on the ground to set up or restore businesses, and addressing market failures due to conflict. The objective is to create humanitarian impact, always in accordance with the Movement’s principles of neutrality, impartiality and independence 5 .

1 See, for example, ‘Microeconomic Initiatives: Handbook | International Committee of the Red Cross (icrc.org)’

2 Le Mouvement International de la Croix-Rouge et du Croissant-Rouge est le plus grand réseau humanitaire au monde. Il est composé du Comité international de la Croix-Rouge (CICR), de la Fédération internationale des Sociétés de la Croix-Rouge et du Croissant-Rouge et des 191 Sociétés nationales.

3 On the founding of the Red Cross, see ‘Founding and early years of the ICRC (1863-1914) | International Committee of the Red Cross’.

4 For a historical review, see the 2016 publication The ICRC and the private sector.

5 A clear set of guidelines for engaging with the private sector is critical. In this respect, please see ICRC’s ‘Framework on Engaging with the Private Sector to Mobilize Support (icrc.org)’.

JUAN CODERQUE

Juan Coderque has worked for the International Committee of the Red Cross (ICRC) since 1997. He has had postings in the Caucasus, the DRC, South Sudan, Côte d’Ivoire, the Gaza Strip, Lebanon, the Sahel, the Russian Federation and Geneva. Over the past ten years, he has focused on exploring innovative public-private partnership and financing models for humanitarian action. The ICRC has recently merged its innovative finance capacity with the Humanitarian Innovative Finance Hub (HIFHUB), launched by the Danish Red Cross in early 2023 to enable innovative finance across the Red Cross Red Crescent Movement and the overall ecosystem. Juan is now Senior Advisor at the HIFHUB and at the ICRC.

39 INTERVIEW

Nexus partnership in action

The ICRC and AFD Group have been engaged in a partnership since 2014, and the ICRC has become a key partner in the context of challenging crisis and fragility situations. The partnership facilitated the adoption of several projects in water and sanitation, health, and agri-food systems. It enabled the active engagement of Proparco with the ICRC in late 2023, proving the ambitions of both groups to innovate along the humanitarian-development-peace nexus, with the objective of anchoring the private sector’s actions in fragile contexts with projects that promote the resilience of populations in conflict-affected situations. As of 2024, Proparco and the ICRC seek to cooperate in a number of pilot operational initiatives, mainly focusing on economic and financial security, and access to essential services. The first steps of the collaboration include working on access to finance for forcibly displaced people and the optimization of cash transfer programs, building exit strategies of the ICRC programs for SMEs affected by crises, and sharing experiences in WASH and energy sectors.

FOCUS ICRC

The International Committee of the Red Cross (ICRC) is an impartial, neutral and independent organization whose exclusively humanitarian mission is to protect the lives and dignity of victims of armed conflict and other situations of violence, and to provide them with assistance. The ICRC also endeavours to prevent suffering by promoting and strengthening humanitarian law and universal humanitarian principles. Established in 1863, the ICRC is at the origin of the Geneva Conventions and the International Red Cross and Red Crescent Movements. It directs and coordinates the international activities conducted by the Movement in armed conflicts and other situations of violence.

AS CRISES AND CONFLICTS BECOME MORE PROTRACTED, WHAT ROLE CAN THE PRIVATE SECTOR PLAY IN COMPLEMENTING THE RESPONSES PROVIDED BY HUMANITARIAN ORGANIZATIONS?

Undoubtedly, there is an important drive across the ecosystem to ensure that public and private actors other than humanitarian agencies step up their investments in fragile settings. The ICRC and other Movement partners have been exploring innovative financing approaches. These include the Humanitarian Impact Bond (HIB), the Goma West Water Project and the DREF Insurance, the latter led by the International Federation of the Red Cross (IFRC).6 The key learning here is that partnering across sectors – with humanitarian agencies and Movement partners, development institutions, corporates, investors, and host governments – enabled by

innovative financing approaches, de-risks specific projects and catalyzes the deployment of public and private capital as well as market-based solutions for the benefit of people and communities in fragile settings. An avenue we are interested in exploring with Proparco’s support is the link between the cash transfers provided by the ICRC and other Movement partners -such as the IFRC and the British Red Cross- and the long-term access to inclusive financial services. This may be another bridge between humanitarian action and development, and therefore lead to enhanced resilience for people, and less dependence on aid.

Kenya Red Cross are bringing together their capacity and expertise in the innovative finance space,

Innovative Finance Hub’ (HIFHUB) launched by the Danish Red Cross in early 2023. The HIBHUB

promote

support innovative finance for the wider Movement.

The ICRC, the IFRC, the Danish Red Cross and the

under the banner of the ‘Humanitarian

intends to

and

AT THE FOREFRONT OF THE HUMANITARIANDEVELOPMENT-PEACE NEXUS, THE INTERNATIONAL COMMITTEE OF THE RED CROSS

WHAT CONDITIONS WOULD ENABLE THE PRIVATE SECTOR TO SUPPORT THE DYNAMICS OF RESILIENCE? CONVERSELY, IN WHICH SCENARIOS COULD THE PRIVATE SECTOR BE A FACTOR OF DESTABILIZATION?

Let us use the fictitious case of a mining company – call it ExtractCo – operating in a conflict-affected and fragile context. ExtractCo receives a legal license from the host government to use the land and extract minerals, without much consideration for any environmental, social, and governance (ESG) standards. In no time, ExtractCo’s operations and security set-up7 start exacerbating tensions with the local communities, fueling violence and further instability. To preclude the emergence of another ExtractCo, heightened, conflict sensitive human rights due diligence (HRDD) processes should be mandatory for private companies operating in fragile contexts. These should include proactively iden-

tifying, measuring, mitigating and wherever possible preventing negative impacts. This especially because of the exacerbated risks in these contexts. Conflict sensitivity in this case means adjusting business strategies and operations to ‘do no harm’ and maximize positive contributions to peace and stability8. Companies that adhere to high standards of responsible business conduct are also better informed about their operating environments and the potential impacts of their actions; consequently, they are better equipped to build resilience to crises and conflicts, both for themselves and local communities. This proactive approach has the potential to turn businesses into peace-building actors.

ARE SPECIFIC GEOGRAPHICAL, CULTURAL OR SOCIAL CONTEXTS MORE CONDUCIVE TO COOPERATION BETWEEN HUMANITARIAN AND PRIVATE SECTOR ACTORS?

The essence of successful collaboration lies in the parties’ mindsets and identifying shared goals and objectives. When humanitarian actors and private sector entities share a common understanding of their objectives – be they resilience building, community support, or sustainable development – the groundwork for meaningful cooperation is laid. This shared perspective facilitates pooling resources, expertise, and networks to achieve collective goals 9. Besides, specific contexts can be more conducive to cooperation. The presence of SMEs in a region fosters collaboration, enabling the leveraging of local expertise and networks to enhance aid impact and build economic resilience. It is no coincidence that the majority of fair-trade enterprises are located in

the Global South, as they embody a response to community needs, championing responsible business practices and sustainable development.

When humanitarian actors and private sector entities share a common understanding of their objectives – be they resilience building, community support, or sustainable development –the groundwork for meaningful cooperation is laid.

7 For a comprehensive exploration of security-related challenges and associated recommendations, refer to the DCAF-ICRC Toolkit ‘Addressing Security and Human Rights Challenges in Complex Environments’.

8 Businesses must respect international humanitarian law in their operations. Find more in the ICRC brochure ‘Business and International Humanitarian Law’.

9 For resources designed by humanitarians to promote corporate respect for international humanitarian law, refer to the compendium by the Australian Red Cross and ICRC ‘Armed conflict, international humanitarian law and responsible business conduct’.

AT THE FOREFRONT OF THE HUMANITARIANDEVELOPMENT-PEACE NEXUS, THE INTERNATIONAL COMMITTEE OF THE RED CROSS

HOW CAN INTERNATIONAL INITIATIVES, SUCH AS THE HRI, HELP CONVERGE THE OBJECTIVES OF THE PRIVATE SECTOR AND HUMANITARIAN ORGANIZATIONS?

Initiatives like the World Economic Forum’s Humanitarian and Resilience Investing (HRI) initiative help interconnect fragmented ecosystems to catalyse public and private capital to strengthen the resilience of the most vulnerable communities. This particular initiative supports humanitarian organisations, donors, DFIs, investors, foundations, and corporates to increase their readiness to engage with one another through tools such as the ‘Organisational Readiness playbook’, and convenings, such as a curated meeting to ‘Unpack Humanitarian-DFI partnerships’. Most recently the HRI initiative launched a ‘Call to Action’ to align the efforts of these organisations to mobilize 10 billion USD

CAN YOU GIVE

in commercial and catalytic capital to enable 1,000 businesses to scale up in frontier markets by 2030. This ‘Call to Action’ received over 40 commitments from diverse organisations including humanitarian and private sector actors, and will work with its partners to align their efforts in specific markets, starting in Northern Kenya as the first frontier market. Finally, the initiative works with humanitarian partners to foster private-public-philanthropic partnerships to support and scale projects addressing the impact of climate on our most vulnerable communities. Notably, Proparco and the ICRC are both active members of the HRI.

AN EXAMPLE OF A PROJECT OR OPERATIONAL COLLABORATION THAT ILLUSTRATES THE LINK BETWEEN THE ICRC AND THE PRIVATE SECTOR?

Globally, the ICRC engages with major companies to mobilize their comparative advantages and know-how. An example is Lombard Odier, a Swiss private bank that has collaborated with the ICRC since the early 1860s. It has provided funding for operations, seed funding to boost innovation and innovative finance at the ICRC; helped design the sector’s first Humanitarian Impact Bond (HIB) and has invested in it; and, together with the ICRC, the World Economic Forum and the IMD Business School, has co-designed the ‘Driving Innovative Finance for Impact’ course.10 Another example, on the health front, in Lebanon and Iraq, is the ICRC’s work with Novo Nordisk, the Danish Red Cross, the London School of Hygiene and Tropical medicine and local academic partners and national societies to improve access to, and care for non-communicable diseases (NCDs) in humanitarian settings.

Other examples at the country level, potentially relevant to the prospective Proparco-ICRC collaboration are:

- In Ukraine, the ICRC provides conflict-affected small- and medium-sized enterprises (SMEs) with conditional grants of EUR 5,00020,000 to restart or increase their production and create new jobs. These are repaid by the SMEs in the form of goods and services for the community at no cost or a subsidized cost. An example is a construction company ‘repaying’ its grant by providing pro bono shelter repairs to vulnerable community members. Another is a factory that produced briquettes for heating repaying its grant by providing briquettes at a subsidized cost to vulnerable elderly community members.

10 The course has benefited from the participation and support of both AFD and PROPARCO: Scaling innovative finance for impact through partnerships - IMD News

AT THE FOREFRONT OF THE HUMANITARIANDEVELOPMENT-PEACE NEXUS, THE INTERNATIONAL COMMITTEE OF THE RED CROSS 42

- In Iraq, where villages were razed, the ICRC provided cash grants for people to rebuild their houses. But to enable this, the local blacksmiths, carpenters and masons – who had lost their tools, machinery and workshops – were provided with start-up grants to ensure that they – rather than bigger companies from a major city 40 km away – would benefit simultaneously. This created a multiplier effect in the local economy, and within a few months, people had moved back to their villages, and more shops and businesses reopened.

- In the DRC, the ICRC with coalition partners, including Lombard Odier, SDC, and the World

AT THE FOREFRONT OF THE HUMANITARIAN-

Bank, designed a project to sustainably reinforce the Goma West water service. With its comprehensive studies and core infrastructure, the project is envisioned to enable private operators to develop sustainable business models for providing water.

As indicated, the ICRC engages with the private sector at global, national and local levels11 We envisage significant scope for the ICRC, the Movement, and PROPARCO to develop approaches to partnering, funding and financing that lead to market-based solutions at the country level, for the benefit of people affected by conflict and fragility.

Private Sector & Development magazine would like to thank David Kuhn, Economic Security Partnerships Advisor (ICRC) and Claude Voillat, Responsible Business Conduct Advisor (ICRC) for their contributions to this interview.

For more information: Juan Coderque, Senior Advisor on Innovative Finance (Humanitarian Innovative Finance Hub and ICRC), jcoderque@icrc.org

Christophe Martin, Head of the Paris Delegation (ICRC), cmartin@icrc.org

Fidy Rajaonson, Development Centre of Expertise Manager (ICRC), frajaonson@icrc.org

Express Union Tchad: smoothing the link between cash transfers and access to credit

Express Union Tchad is a Chadian microfinance institution (MFI) that facilitates access to funding for women and rural populations and provides cash transfer services for humanitarian organizations. Express Union Tchad leverages its network of 37 branches located in 18 of the country's 23 regions to serve the entrepreneurial fabric more effectively, especially in rural areas. It also has the necessary resources to ensure access to financial services for displaced people and their host populations, particularly in Eastern Chad (which hosts over 800,000 refugees fleeing the Sudanese conflict). In April 2024, Proparco granted Express Union Tchad a loan of one million euros to enhance its capacity to meet the financing requirements of MSMSEs and low-income households, thereby creating jobs and promoting financial inclusion.

The activities of this Chadian MFI illustrate the continuum that needs to be forged between emergency work, which often focuses on food security and basic livelihoods, particularly for displaced people, by analysing the link between cash transfers, and wider access to financial services, promoting an entrepreneurial mindset in these host areas. DFIs can help support microfinance institutions that facilitate cash distributions on behalf of humanitarian organizations while pursuing lending activities.

11 On the ICRC’s approach to market-based programming, please refer to the video ‘Market based programming : analyzing and working with markets in crises’; for examples of specific programmes, refer to the video ‘ICRC Economic Security: supporting income & markets in conflict-affected communities’ and to the three case studies (Colombia, Iraq and Ethiopia).

DEVELOPMENT-PEACE NEXUS, THE INTERNATIONAL COMMITTEE OF THE RED CROSS

The ARIA initiative: enabling DFIs to extend their vital role to Africa’s frontier markets

Vivianne Infante, Director & co-leader ARIA initiative, BII Alex Kucharski, Manager & co-leader ARIA initiative, BII

Development finance across Africa is unevenly distributed, with 25 of its smallest economies receiving only 4% of investments since 2010. Yet, the Africa Resilience Investment Accelerator initiative (ARIA) is showing that focus, resources and collaboration can enable greater investment in these ‘frontier’ markets, by addressing both the internal (DFI-specific) and external (country-specific) challenges.

FOCUS

ARIA

ARIA (Africa Resilience Investment Accelerator) is a BII- and FMO-led initiative to unlock more investment in frontier markets in Africa, with an initial focus on Sierra Leone, Liberia, Benin, the DRC and Ethiopia. ARIA collaborates with a number of other DFIs, such as Proparco, Swedfund, Norfund, the DFC and the IFC.

Development finance is key to supporting the much-needed private sector development and economic growth in the poorest and most fragile markets in Africa (here referred to as ‘frontier markets’). ARIA1, was set up by British International Investment (BII) and the Dutch Entrepreneurial Development Bank (FMO) as an initiative to unlock investment in frontier markets through physical presence, origination support, technical assistance, and fostering collaboration among DFIs and development partners. The focus for ARIA currently is on Sierra Leone, Liberia, Benin, DRC and Ethiopia. Its work shows that with focus, dedicated resources and collaboration, more investment in frontier markets is possible.

The distribution of development finance across Africa is uneven, and many frontier markets have been left behind. A recent ARIA analysis of 4,000 non-sovereign investments made since 2010 by nine major development finance institutions2 showed that of the US$72.3 billion invested, 46% was concentrated in the three African countries with the largest economies (South Africa, Nigeria, Kenya). Conversely, the bottom

25 countries received only 4% of investments. ARIA has built a database of over 400 investment opportunities relevant to DFIs in their current markets of focus, offering an opportunity to analyse investment demand. Some insights follow:

- The companies assessed by ARIA require more than US$ 2 billion, with most seeking debt or a mix of debt and equity.

- Investment opportunities are concentrated in the financial services, agriculture, manufacturing, and energy sectors.

- Companies are mostly flexible and willing to take loans in foreign currency. Nevertheless, liabilities in foreign currency expose those earning in local currency (such as manufacturers substituting imports) to possible currency devaluation. Local currency funding would obviate this risk.

- Most opportunities are in the US$ 5 to 50 million range.

- Companies often require technical assistance to prepare them for investment and to meet DFI requirements. Areas of technical assistance needed include E&S and governance; strategy; market-readiness; financial, operational, and environmental social governance (ESG) advice; document preparation; and technical expertise.

2 Analysis completed by ARIA for an upcoming publication on development finance in frontier markets comprised the respondents AfDB, BII, DEG, DFC, Finnfund, FMO, IFC, Norfund, and Proparco.

1 See: https://www.ariainvests.org

44 SPOTLIGHT

CHALLENGES IN ATTRACTING DFI

INVESTMENT INTO FRONTIER MARKETS

Some of the challenges related to investing in frontier markets are well documented. A recent ARIA survey of 40 staff members across DFIs exemplified the external country-specific barriers to DFIs investing more in frontier markets. Currency risk was the major obstacle. This is due to contexts of broader macro-economic instability, often found in frontier markets, which for international investors hoping to repatriate profits, makes investing more challenging. Also identified as major or moderate obstacles by most respondents were political instability and insecurity, the lack of proper physical infrastructure, and poor regulatory environments and compliance (resulting in unreliable corporate governance and financial information).

While DFIs cannot better control the exter-

nal barriers to investing, a number of internal barriers also contribute to limiting their investments in frontier markets. The obstacles most often identified as major or moderate were misaligned internal incentives, limited capacity and resources to invest in identifying development opportunities, DFI investment instruments not being tailored to the available opportunities – for example, excessively high pricing requirements, or lack of access to concessional funding – and lack of strategic focus in frontier markets, as well as existing conflicting priorities. Some respondents noted that, despite the overall interest in investing more in frontier markets, growing requirements in terms of E&S, KYC, compliance and financial returns are becoming more restrictive.

COLLABORATION IN FRONTIER MARKETS IS VITAL

ARIA was formed as an initiative integrated within BII and FMO (current funders of the initiative) and works closely with other DFIs – such as Proparco, Swedfund, Norfund, DFC and IFC – to unlock greater investment in frontier markets. In these markets, collaboration on market knowledge, opportunities and upstream work prepares companies for investment and can reduce transaction costs, while co-investing can reduce risks. Collaboration between DFIs and development partners is particularly important in frontier markets in order for various tools to achieve the joint objective of supporting private sector development. ARIA has built partnerships with development parties present and active locally, for example, with the UKAid-funded Invest Salone, in Sierra Leone, to attain their shared objective of unlocking investments. In the last two years, ARIA

has assisted 10 deals to enter DFI pipelines, with one having been approved by Proparco. It has supported 18 companies with technical assistance, with more forthcoming. Together with its partners, ARIA is also working on ecosystem initiatives to address cross-cutting barriers to investment.

In summary, frontier markets need DFI investment. ARIA’s work illustrates that more investment is possible if DFIs are able to address the internal barriers to better serving these markets. More focus on, and adaptation of tools and processes is needed, alongside technical assistance to support investment readiness and to build the investment ecosystem. Collaboration among DFIs and between DFIs and development partners is also key to ensuring more investment takes place.

AN ARTICLE BY VIVIANNE INFANTE

Vivianne Infante is a Director at British International Investment, co-leading ARIA. Since 2015 she has also been BII’s Country Director for Ethiopia (covering the Horn of Africa) and the DRC, countries where she lived from 2015 until 2021. Her investment coverage responsibilities include deal origination, portfolio management support and representative responsibilities. Vivianne qualified as a corporate solicitor in England and Wales in 2004 and worked at the City law firm White & Case as a Project Finance and International Arbitration lawyer. She has also worked and lived in Nigeria, as counsel at the Nigerian Sovereign Wealth Fund (NSIA), and as a corporate lawyer in Ghana.

ALEX KUCHARSKI

Alex Kucharski is a Manager at British International Investment, straddling technical assistance and financial institutions, and is a co-leader of ARIA. He set up BII’s portfolio of country technical assistance programmes, which aims to unlock investment in frontier markets, such as Myanmar (now closed), Nepal and Ghana. Prior to joining BII, Alex lived in Sierra Leone, Liberia, Ghana and Northern Nigeria, working on private sector development programmes.

45 SPOTLIGHT

The transformative role of the private sector in forced displacement

Michel Botzung, Head, IFC-UNHCR joint initiative on private sector solutions in forced displacement

The world is currently facing a forced displacement crisis. Forced displacement has shifted in scale, and its increasingly protracted nature calls for development approaches that extend beyond the prevailing care and assistance approach. Yet, within development approaches, we believe in private sector-led solutions in forced displacement contexts.

AN

ARTICLE BY MICHEL BOTZUNG

Michel Botzung leads, from Istanbul, the joint initiative of the International Finance Corporation (a member of the World Bank Group) and the United Nations High Commissioner for Refugees, aimed at promoting private sector engagement in forced displacement contexts. His career at the IFC has unfolded on the ground in Africa, South Asia, and the Middle East, focused on supporting SMEs and adapting development finance institutions to new contexts. In his previous role, Michel expanded the IFC's engagement in fragile and conflictaffected countries in Africa through a combination of innovation and increased presence on the ground.

Set against a stark global economic backdrop, current forced displacement trends reflect a deeply concerning global reality. The number of forcibly displaced people continues to grow annually, with a record 117 million people displaced in 2023 1 . Over half of the displaced originated from just three countries, Syria2, Ukraine and Afghanistan. The scale of global forced displacement is such that today 1 in 68 people worldwide are fleeing conflict, war or persecution. The majority are displaced inside their own countries, internally displaced persons (IDPs) reached an all-time high of 75 million in 2023, rising from around 40 million only 5 years ago 3. The war in Ukraine triggered the highest number ever recorded for any one country 4 .

Forced displacement crises are growing in size and shifting in nature. Two-thirds of displaced populations find themselves in protracted situations, living in unsustainable conditions for years in their host countries, with little to no prospect for return. On average, displacement lasts 20 years for refugees and more than

10 years for IDPs. Low- and middle-income countries are disproportionately affected, with 9 in 10 displaced persons often grappling with their own socio-economic challenges, including the consequences of COVID-19, inflation, debt burden, food insecurity, drought, and conflicts. There has also been a strong urbanization trend, with many displaced travelling from camps to cities in search of socio-economic opportunities often lacking in the regions they have arrived in.

With dwindling humanitarian financing and the protractedness of refugee contexts, refugees’ inclusion in national services and access to socio-economic opportunities is more critical than ever. Inclusion ensures their protection against harm and repatriation, and permits them access to health, education and other social services. It also helps to strengthen their self-reliance and resilience, enabling them to contribute to the social and economic conditions of the communities who host them, rather than having to depend on unsustainable parallel humanitarian assistance for years.

1 Global Appeal UNHCR, 2023. https://reporting.unhcr.org/global-appeal-2023

2 The number of forcibly displaced Syrians continue to be the largest group with 13.3 million, as has been the case for the last decade.

3 IDMC GRID 2023 Global Report on Internal Displacement, 2022. https://api.internal-displacement.org/sites/default/files/publications/documents/ IDMC_GRID_2023_Global_Report_on_Internal_Displacement_LR.pdf

4 16.9 million IDPs

46 OP-ED

A recent IMF study “Regional Spillovers from the Venezuelan Crisis: Migration Flows and Their Impact on Latin America and the Caribbean”5 indicates that although the arrival of Venezuelans seeking better lives has strained the economies and societies of Latin American host countries, their socio-economic inclusion has the potential to increase GDP in these countries by up to 4.5 percentage points by 2030.

In 2018, the Global Compact on Refugees (GCR) marked a significant shift in the approach to addressing forced displacement challenges. It recognizes that traditional humanitarian aid, while crucial for immediate relief, falls short in providing long-term solutions for these populations and their host communities. The GCR advocates for developmental approaches, broadening the focus on refugees as recipients of aid to recognizing their developmental impact on, and potential for host communities. It recognizes the potential of the private sector in providing sustainable solutions for refugees and actively encourages private sector involvement in initiatives aimed at fostering economic opportunities, empowering them, and enabling their integration into national economies. The GCR is a game changer on two levels: for host governments and populations, it extends the benefit of interventions in areas impacted by the influx of refugees, making their presence somewhat more acceptable in return for broader economic and social development opportunities;

for private companies, it broadens the market opportunity, focusing on a larger geographical scope – forced displacement contexts (bringing together the displaced and their hosts) – rather than focusing on specific social groups.

The GRC has enabled a stronger engagement of development actors in forced displacement contexts. Notable progress has been made by development banks (MDBs), through a responsibility sharing approach with refugee-hosting governments, in providing financial and technical support for sustainable access to jobs, services, social assistance, as well as paths to solutions. The World Bank has been a forerunner through its partnership with United Nations High Commissioner for Refugees (UNHCR) and its dedicated financing arms for supporting countries hosting refugees (namely, the IDA Window for Host Communities and Refugees for low-income countries, and the IBRD Global Concessional Financing Facility for middle-income countries). These instruments offer critical incentives for host countries to include refugees in national systems.

The MDB Coordination Platform on Economic Migration and Forced Displacement enhances its cooperation on knowledge, evidence, and data and ensures coordination with other stakeholders, including deploying better-targeted instruments. Yet, there remains enormous potential to be leveraged in the private sector.

WHAT IS THE CURRENT STATE OF PRIVATE SECTOR ENGAGEMENT IN FORCED DISPLACEMENT CONTEXTS?

The private sector is already a key actor in forced displacement contexts, mostly in three ways. One is informal sector activities which are prevalent in all contexts; another is its growing CSR (Corporate Social Responsibility) activities, which have surged since the onset of the Ukraine War; yet another is procurement (being con -

tracted by Humanitarian agencies and INGOs to deliver goods and services). However, we are now calling for another, more impactful, private sector engagement, namely bringing the business dimension of the private sector to forced displacement contexts.

5 Regional Spillovers from the Venezuelan Crisis: Migration Flows and Their Impact on Latin America and the Caribbean, 2022. https://www.imf. org/en/Publications/Departmental-Papers-Policy-Papers/Issues/2022/12/01/Regional-Spillovers-from-the-Venezuelan-Crisis-Migration-Flows-andTheir-Impact-on-Latin-525729

47 OP-ED

According to a forthcoming study from the IFC-UNHCR Joint Initiative, “From Host to Growth Communities” , the private sector engagement in forced displacement contexts varies across regions. New opportunities have recently emerged in the Americas and Europe, where middle-income countries have been affected by forced displacement, particularly those hosting Venezuelan and Ukrainian refugees. Both continents are facing labour shortages, and we are seeing positive trends among financial service providers, which are extending their services through digitalization, contributing to the enhanced financial inclusion of refugees.

As noted above, we have seen some interesting progress, particularly with financial service providers extending their services to refugees and the displaced. In terms of other areas such as employment in the private sector, refugees are usually limited to taking jobs that locals are reluctant to do, either physically demanding work, or manufacturing and agriculture-related work. Demographic changes, such as aging populations, policy changes, labor shortages, and nearshoring (locating manufacturing closer to main markets), along with advancing digitalization are creating new employment prospects beyond the traditional so-called 4Ds (dirty, difficult, dangerous, or dull jobs) in some FDP situations.

WHY IS RESPONSIBLE PRIVATE SECTOR ENGAGEMENT NOT HAPPENING AT A LARGER SCALE?

The first barrier to scaling is an important one, that of an enabling and inclusive policy environment which allows FDPs to work legally with their hosts, register their businesses, and access key services (e.g. mobile money.). An enabling regulatory framework is key to advancing market-based solutions. This facilitates and incentivizes private sector engagement. However, even where there are progressive and inclusive regulations, their application is not always uniform. Administrative, institutional, and practical barriers remain,

particularly at the local level. In my experience, one of the first questions larger companies ask is “Is it legal to employ, work with, source products, etc. from refugees?”

A second bottleneck is in access to, and ease of doing business in forced displacement contexts. Often refugees and the displaced are in remote areas, in the poorest parts of a country. In camp settings they often rely on a humanitarian economy, which deters longer-term sustainable economic development. In urban

The IFC-UNHCR Joint Initiative: Accelerating Systematic

Private Sector Engagement

Launched in 2023, the Joint Initiative’s ambition is to accelerate the pace of private sector engagement. Five years after adopting the Global Refugee Compact, some progress has been made, but to a large extent, private sector engagement today is still focused on procurement or corporate social responsibility. What the Joint Initiative is calling for, by bringing together a specialized humanitarian agency like the UNHCR, and IFC’s private sector expertise is to grow the space and enable a far greater, more systematic, private business engagement in forced displacement. We’ll enable it through a combination of operational support (expertise, funding) to IFC/UNHCR teams on the ground and through the production and dissemination of operational knowledge on what works and what doesn’t and increase the level of awareness across a broader community of stakeholders.

THE TRANSFORMATIVE ROLE OF THE PRIVATE SECTOR IN FORCED DISPLACEMENT

areas, they are often concentrated in the poorest neighborhoods. While the informal economies may be vibrant, refugee related markets are still generally very low-income ones.

Unique challenges also exist on the private sector side. Many businesses ignore forced displacement markets, have limited market intelligence on opportunities, and often have misconceptions and biases about engaging FDPs.

Or while keen to engage, they do not have the right tools or information to do so. The second question frequently asked is “For how long will they stay?” Lastly, even when a decision is made to engage, it is the operator in the last mile who finally decides to extend a loan, offer a service, or buy goods from FDPs: as we have seen in many contexts, there can be strong bias against working with refugees.

WHAT WOULD IT TAKE TO GROW THE PRIVATE SECTOR ENGAGEMENT IN FORCED DISPLACEMENT?

The International Finance Corporation (IFC) portfolio has a growing number of projects in forced displacement, particularly in the financial inclusion area. In Lebanon, IFC supported microfinance institution Al Majmoua to provide financial services to very small enterprises owned by refugees and host community members. In Colombia IFC supported Bancamia , and in Peru, Financiera Confianza to implement tailored value propositions for Venezuelan migrants and refugees. IFC also provided an investment to Santander Poland to enable loans for SMEs owned and managed by Ukrainians and Polish SMEs that are inclusive of Ukrainian displaced. In Moldova, IFC is providing advice to MAIB bank, and in Georgia microfinance institution, Crystal, to offer tailored services to Ukrainians. IFC is also looking at the potential of our clients in agribusiness, education, services, as well as infrastructure transactions (water or electricity) that could serve areas and geographies that are impacted by forced displacement.

Based on these examples, three key new approached would help to grow private sector engagement:

1. Include a private sector perspective from the onset, even in emergency humanitarian situations. Moving forward, opportunities must be seized. To achieve sustainable out-

comes in humanitarian emergencies, early and active private sector engagement is essential. Private sector business operations can and should be leveraged right from the onset of a refugee crisis.

2. Change the mindset and broaden the scope. Do not look at refugees or internally displaced populations specifically; rather focus on the geographic areas impacted. This offers a broader market opportunity and makes it more relevant to host governments. A good example of this is the work the IFC teams have done in and around the Kakuma refugee camp in northern Kenya6. This approach combines support for small businesses – enabling the business environment jointly with the local county government – and trying to attract bigger companies, including whenever possible IFC clients, to an area which had previously been overlooked in terms in development.

3. Support the responsible companies engaging in forced displacement contexts. For DFIs, through a market creation approach, support private sector engagement through a wide range of instruments, from the production/ dissemination of data on market opportunities to rewarding private companies engaging in forced displacement contexts through a combination of cheaper loans and tailored technical assistance.

FOCUS

IFC-UNHCR JOINT INITIATIVE

The IFC-UNHCR Joint Initiative is a strategic partnership aiming at increasing and accelerating private sector engagement in forced displacement contexts. Launched in 2023, the Joint Initiative is based in Istanbul and has a global geographical mandate. It provides operational support (through expertise and funding) to operational teams on the ground and produces and disseminates operational knowledge and lessons learned while engaging with a large range of stakeholders operating in this space. The Joint Initiative has a five-year mandate and is funded by Denmark, the Netherlands, and the United States of America.

6 Kakuma as a Marketplace: A consumer and market study of a refugee camp and town in northwest Kenya, 2018. https://reliefweb.int/attachments/ e369993f-b58b-3321-a902-2b776492e30f/20180427_Kakuma-as-a-Marketplace_v1.pdf

THE TRANSFORMATIVE ROLE OF THE PRIVATE SECTOR IN FORCED DISPLACEMENT

THE MAGAZINE

Private Sector & Development (PS&D) is Proparco’s magazine that compares the views of experts on issues relating to the role the private sector plays in the development of Southern countries, particularly in Sub-Saharan Africa.

The magazine calls on the expertise of development players in these geographical areas, especially private sector decision-makers, donors, international organizations, NGOs, as well as academics and experts from development research institutes.

Each issue of the PS&D magazine focuses on a theme addressed through about a dozen articles. Since its launch in 2009, Private Sector & Development has become a reference publication on the role of the private sector.

THE ONLINE MAGAZINE

The PS&D online magazine gathers the contributions published in the magazine, as well as video interviews with development players produced at Proparco by the team responsible for the editorial coordination of the magazine. proparco.fr/en/private-sector-developmentmagazine

PS&D #40 SUSTAINABLE CITIES: HOW PRIVATE SECTOR PLAYERS ARE GEARING UP By 2050, almost 70% of the population of developing countries will be living in cities. This issue, published in December 2023, presents several examples of how sustainable urban projects are designed and rolled out.

PS&D #37 FACED WITH THE CRISES, WHAT PROSPECTS FOR THE PRIVATE SECTOR?

The 37th edition of Private Sector & Development magazine, produced with the association EDFI, gives a voice to European development finance institutions and presents their responses to the crisis linked to the Covid-19 pandemic.

50 LATEST ISSUES

PS&D #39 FOOD SECURITY: THE CONTRIBUTION OF THE PRIVATE SECTOR

To mark World Food Day on 16th October 2023, the 39th issue was devoted to food security. It provides a collective reflection on the subject and highlights the need to get the private sector more involved in safeguarding food security across the globe.

PS&D#36 TECHNICAL ASSISTANCE: OPENING UP NEW HORIZONS

This issue, which was published in late 2021, provides avenues for reflection on technical assistance (TA) and what it involves. It gives a voice to a number of experts from development finance institutions, the European Union, investment companies and beneficiaries of TA programs.

PS&D #38 CLIMATE CHANGE ADAPTATION: HOW THE PRIVATE SECTOR IS SCALING UP

To mark COP27 held in November 2022, the 38th issue of Private Sector & Development magazine is dedicated to climate change adaptation and presents the drivers for action of Development Finance Institutions and the private sector faced with the challenges of the climate crisis.

PS&D #SPECIAL EDITION THE NEW ENTREPRENEURSHIP DYNAMICS IN AFRICA

The objective of this special edition, which was published to mark the Africa-France Summit organized in October 2021, is to report on Africa’s entrepreneurial revolution and show how this dynamic stimulates business relations between Africa and France.

51 LATEST ISSUES

Private Sector & Development (PS&D) is a half-yearly publication that provides analyses of the mechanisms through which the private sector can support the development of southern countries. Each issue compares the views of experts in different fields, from academia to the private sector, development institutions and civil society.

proparco.fr/en/private-sector-development-magazine

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