NDF joins green development fund to support SMEs

An impact fund designed and launched by the United Nations Capital Development Fund and Bamboo Capital Partners, the BUILD Fund strives to fill the important ‘missing middle’ funding gap in LDCs. This means providing investments larger than micro loans but smaller than commercial lending – an acute need for small and medium-sized enterprises (SME), which are typically overlooked by traditional lending institutions.

“The SME is the segment that contributes the most to GDP of local economies, especially in LDCs,” said Sally Gitonga, the Investment Director at Bamboo Capital Partners. “They contribute significantly to employment, economic growth and stability, and tax revenue. Unfortunately, in the view of traditional financial services, SMEs are viewed more as a high risk and receive far less capital support.”

Resilience through gender equality

Often most affected by economic instability, climate change, and violent conflict, gender equality is at the core of sustainable development and for building climate resilience. Ensuring women’s empowerment and gender equality is a core task of the BUILD Fund, and something Bamboo Capital Partners has extensive experience working on.

“In some LDCs, closing the gender gap could take over 90 years. Most women work in agriculture or are self-employed with little to no access to capital funding,” explains Marie Puaux, Head of Impact Management at Bamboo Capital Partners. “The BUILD Fund promotes gender equality and women empowerment in the companies we work with, as well as throughout the value chains they operate.”

Sustainable development where it is needed most

Echoing NDF’s mission of providing finance where climate meets development, the BUILD Fund’s four sectors of investment are Green Economy and Renewable Energy, Food Security and Nutrition, Financial Inclusion and Innovation, and Local Infrastructure.

“These sectors have the capacity to impact the largest number of people and build sustainable climate change resilience, which is a cross-cutting focus of the fund,” added Marie Puaux.  

The BUILD Fund’s climate-centred mission aligns with that of the Sustainable Development Goals (SDG). In particular, SDG 7 aspires to ensure ‘affordable, reliable, sustainable and modern energy for all,’ emphasizing the critical role access to clean energy plays in the structural transformation of developing economies.  This is all the more paramount in LDCs, where up to 62% of the population have no access to electricity.

Designed for impact

A key aspect of the BUILD Fund is its blended finance structure, which is designed to incentivize investment from the private sector in underinvested communities. Currently, LDCs receive only 6% of private finance mobilised by official development finance globally – of which very little trickles down to small businesses. BUILD’s blended finance structure incentivizes risk-averse private investors by protecting their capital through catalytic investments coming from institutional investors like NDF.

The BUILD Fund further mitigates against risk through targeted capacity building: “We provide technical expertise to local businesses in financial management, marketing strategies, and more, effectively lowering risk by laying the foundation for sustainable businesses. Each partner organisation brings different strengths,” Sally Gitonga said.

The BUILD Fund’s focus on impact together with profit is expanding international private investment portfolio to businesses which bring an outsized and critical function to their communities, whether it be through micro-grids, climate-smart agriculture, or women-led local enterprises.

The potential for impact is huge. As climate change poses a multifaceted threat to LDCs, especially in sub-Saharan Africa, supporting local actors to build economic, social, and physical resilience represents a robust backdrop against future climate-related disasters and their human impact.