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Embassy of Finland Increases Support by €200,000 for IFC Mozambique Small Business Initiative


In Washington, D.C.:
Hannfried Von Hindenburg

Phone:

Email:
hvonhindenburg@ifc.org

In Africa
:

Unathi Mgobozi

Phone: +27 11 731 3149

Email:
umgobozi@ifc.org


Maputo, Mozambique, May 15, 2006—The Embassy of Finland and the International Finance Corporation, the private sector arm of the World Bank Group, today signed an amendment confirming an additional contribution of €200,000 from the Finnish government to the IFC Mozambique SME Initiative (MSI).  The added contribution will support MSI investments in Mozambique’s growing forestry and forestry products sector.

Finland’s policy considers international development cooperation in the context of its broader foreign policy, which aims to:

  • Promote global security
  • Reduce widespread poverty
  • Strengthen human rights and democracy
  • Prevent global environmental problems
  • Encourage economic dialogue
Mozambique is Finland's main long-term partner country, with total development aid to Mozambique at around €million annually. Most of the funds are channeled through direct budget support and through sector funds: health, education, and rural development. In addition the embassy has at its disposal a fund that can be used to enhance economic cooperation. IFC's Mozambique SME Initiative is a good example of this cooperation.

MSI is an IFC pilot program aimed at building a portfolio of viable client companies, whose improved operational and financial results over the next four years will in turn stimulate interest from new investors in the country’s small businesses.  To date, over 16 companies have received investment advice and technical assistance; one loan has been disbursed  to a woman-run print company, Spectrum Graphics Limited , and a second commitment to a water purification and bottling factory, Swissta, was made this month.

MSI is one of the latest in a series of small business partnerships between donor agencies and IFC, an organization whose strong implementation capacity derives from more than 600 full-time small business development specialists in the field worldwide and a Washington-based headquarters staff with expertise in business and finance as well as development. IFC and the Swiss and Finnish governments are contributing resources to the initiative, with others expected to join in the near future.
Despite an improving investment climate, local companies in Mozambique find it difficult to attract capital from private investors. Although several effective programs already serve microenterprises, small and medium businesses can do many things that microenterprises cannot do, such as generate new tax revenues, export their products, or form competitive local industries. They also offer workers more secure and better-paying jobs, as well as opportunities for training, potential for career advancement, health and safety protection in the workplace, and pension and insurance benefits. In almost every country that has substantially reduced poverty and created a sound middle class, the local small business sector has played a critical role. But small and medium enterprises face enormous unmet needs.

The MSI investments, which range between $100,000 and $1 million, are made on a fully commercial basis in existing businesses with strong growth potential. Technical assistance is an integral part of the investment program and provides customized, hands-on, financing to selected small businesses to prepare them to qualify for direct financing from the investment program and to develop successful, sustainable practices postinvestment. These businesses also benefit from the environmental and safety review and from the IFC Against AIDS program, which supports the implementation of HIV/AIDS strategies in the  workplace. Once a portfolio of sustainable small businesses has been successfully developed, the longer-term goal is to develop the initiative into a self-supporting and viable investment vehicle owned by the private sector.

Mozambican small businesses can benefit from an integrated package of financing and technical assistance to expand their firms. In the longer run, additional small businesses will benefit from the project as there will be a new financial institution that can provide services to them and serve as a model elsewhere. Local providers of consultancy services will also benefit from the initiative as it also aims at improving local resources for technical assistance. For more information, visit
www.ifc.org/ifcext/gms.nsf/Content/Mozambique+Initiative.

The International Finance Corporation, the private sector arm of the World Bank Group, promotes sustainable private sector investment in developing and transition countries, helping to reduce poverty and improve people’s lives. IFC finances private sector investments, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. Its 178 member countries provide its share capital and collectively determine its policies.

From its founding in 1956 through FY05, IFC has committed more than $49 billion of its own funds and arranged $24 billion in syndications for 3,319 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY05 was $19.3 billion for its own account and $5.3 billion held for participants in loan syndications.  For more information, visit
www.ifc.org.