BUILD Fund [NDF C136]
The BUILD Fund, is an innovative blended impact finance vehicle designed to support business opportunities that contribute to the Sustainable Development Goals in lower-income countries and primarily in Least Developed Countries.
BUILD Impact Fund
Ref. NDF C136
NDF Commitment: USD 10,000,000
Project Period: 2021 - 2031
Project Partners: United Nations Capital Development Fund (UNCDF) and Bamboo Capital Partners
The Bamboo-UNCDF Initiative for the Least Developed Fund, the BUILD Fund, is an innovative blended impact finance vehicle designed to support business opportunities that contribute to the Sustainable Development Goals (SDGs) in lower-income countries and primarily in Least Developed Countries (LDCs). Managed by Bamboo Capital Partners, the Fund provides growth capital to businesses identified, supported and nurtured by UNCDF. The BUILDER Technical Assistance (TA) Facility is managed at arm’s length by UNCDF, which will be closely involved in pipeline generation, portfolio building, and business advisory support to businesses.
The rationale of BUILD is to connect larger flows of development capital to local markets by addressing the financing gap that affects SMEs, including women entrepreneurs and early-stage companies, in developing countries, where growth is constrained by a lack of access to follow-on financing. This financing gap, otherwise known as the “Missing Middle,” occurs when the capital needs of firms and projects are too large for microfinance institutions and too small for commercial finance; a gap that overwhelmingly impacts frontier markets and least developed countries. The higher-level objective of BUILD is to generate an “investment continuum” of SMEs in LDCs, by taking them from early-stage and high-risk businesses to mature and commercially sound investment opportunities.
BUILD aims to address the fact that LDCs receive only 6% of the total capital flows to developing countries. BUILD’s rationale recognises that LDCs are the most vulnerable to the negative impacts of climate change, they are the least able to recover from climate stress and their economic growth is highly dependent on climate-sensitive sectors. BUILD’s investment strategy is based on providing financing to SMEs operating in LDCs and other lower-income countries in four climate-relevant sectors: green economy, food security and nutrition, financial inclusion and innovation, and local infrastructure.
The blended capital structure of the Fund is composed by different classes of shares, each providing a different risk-return profile and maturity, in order to accommodate a blend of different investor types, from concessional donors to commercial growth finance. The First-loss tranche will primarily serve to leverage more risk-averse investors in the senior tranches. The First-loss tranche will serve to mitigate and absorb losses incurring from the Fund’s portfolio investments.
NDF will provide up to USD 10 million to the First-loss tranche of the BUILD Fund.
Program Manager Isabel Leroux