Access to finance is one of the most pressing needs for the estimated 10,000 small and medium enterprises (SMEs) in Haiti. While larger firms have access to commercial bank funds, and microenterprises are supported by a strong network of microfinance institutions, SMEs face challenges in terms of accessing financing on favorable terms, due to factors such as poor management and lack of collateral. This leaves a massive financing gap, “the missing middle,” which is common in many countries, but is especially severe in Haiti.
While SMEs represent over half of GDP in developed countries, they are largely absent from the formal Haitian economy. However, there are a number of firms in established industries in need of capital to operate and thrive. These constitute a fairly large pool of potential investee companies. Private capital can play an important role in filling this financing gap by recapitalizing these SMEs to revitalize Haiti’s economy.
The Multilateral Investment Fund (MIF), a member of the IDB Group, in partnership with the International Finance Corporation and others, seeks to alleviate the financing gap by launching the Leopard Capital Haiti Fund, the first venture capital/private equity (VC/PE) fund to operate and focus exclusively on Haiti since the 2010 earthquake.
The Fund will provide risk capital (via quasi-equity and equity instruments) to up to ten Haitian SMEs, including start-up companies with less than three years of operation. The focus will be on firms with high growth potential, and possibilities for a strong development impact in their respective communities. The Fund’s target capitalization is $40 million, with a cap at $75 million, and it will have its first closing and begin operations once it reaches $20 million. Deals are expected to be mostly in family-run businesses that need recapitalization, growth capital, and professionalizing.
The MIF’s $3 million investment in the Fund will play a catalytic role in supporting the nascent development of the local VC industry, building local management capabilities, demonstrating the financial viability of these vehicles, and mobilizing critical investors and other players. It will be also be an important source of learning and knowledge creation for the VC industry in Latin America and the Caribbean.
To contribute to building local capacity in the region’s venture capital industry, the MIF will disseminate the Fund’s operational experience and relevant lessons through knowledge and communications activities that will involve the publication of case studies and the participation in local and international events reaching a wide variety of target stakeholders, including local and international investors, fund managers and government institutions.