IFC Invests in Madagascar’s First Sustainability Bond to Boost Renewable Energy and MSME Growth

$36.4 Million Raised to Support Small Businesses and Environmental Projects in Madagascar.

The International Finance Corporation (IFC) has made a strategic investment in Madagascar’s first sustainability bond, issued by Société Générale Madagasikara (SGM), to support renewable energy projects and the growth of micro, small, and medium-sized enterprises (MSMEs) in the country. IFC anchored the three-year sustainability bond with a local currency investment in Malagasy Ariary equivalent to about $11.5 million. The bond was co-anchored by FMO, the Dutch Entrepreneurial Development Bank, and Proparco, a subsidiary of the Agence Française de Développement Group, each contributing $10 million. The total bond issuance raised $36.4 million, which will fund eligible projects and businesses that demonstrate a positive environmental or social impact.

Enhancing Access to Finance for Small Businesses

Madagascar faces a significant funding gap for MSMEs, estimated at around $2.6 billion, which represents more than a quarter of the country’s annual GDP. Through this innovative sustainability bond, IFC’s funding will directly address the financing challenges faced by MSMEs in Madagascar, helping to bridge the gap and empower local businesses to thrive. The bond is specifically focused on businesses and projects that align with the country’s sustainable development goals, particularly in the renewable energy sector.

IFC’s support will also drive growth in local capital markets. As the first sustainability bond and the largest ever bond issuance in Madagascar, it is expected to play a key role in developing local financial markets, opening doors to further investment and expanding access to finance for smaller businesses.

Supporting Renewable Energy and Sustainable Ventures

“The launch of SGM’s pioneering sustainability bond is a milestone for inclusive and resilient economic growth in Madagascar,” said Mehita Fanny, IFC Country Manager for Madagascar. “By supporting small businesses and sustainable ventures, we not only create jobs but also help mitigate some of the vulnerabilities created by climate change, ensuring long-term growth for local communities.”

The bond proceeds will specifically fund renewable energy projects and MSMEs engaged in environmentally sustainable practices. This investment underscores IFC’s commitment to fostering climate-conscious businesses and expanding access to financing for entrepreneurs in Madagascar.

Mobilizing Capital and Strengthening Financial Ecosystems

IFC’s investment helped mobilize additional capital from other investors, ultimately increasing the total funding available for both small businesses and sustainability initiatives in Madagascar. Through this partnership, IFC has unlocked new avenues for supporting green businesses and enhancing climate resilience in the country.

To ensure the success of the bond, IFC’s financing is supported by the International Development Association Private Sector Window (IDA PSW) Blended Finance Facility, which provides a first-loss guarantee, and the IDA PSW Local Currency Facility. This structure mitigates risks and supports the participation of private investors, which increases the overall capital available for small businesses in Madagascar.

IFC’s Continued Support for MSMEs in Madagascar

IFC has been instrumental in supporting MSMEs in Madagascar since 2018 through funding and risk-sharing mechanisms for local financial institutions. To date, IFC has partnered with six financial institutions in the country, supporting around $100 million equivalent in local currency funding for small businesses.

In addition to financial support, IFC provides advisory services aimed at strengthening the country’s credit ecosystem. This includes efforts to develop digital financial services and help financial institutions improve their risk management practices. Through these initiatives, IFC is helping to create a more inclusive and sustainable financial system in Madagascar, empowering local businesses to access the resources they need to grow and thrive.

Path to a Sustainable Future

IFC’s investment in Madagascar’s first sustainability bond represents a transformative step in supporting the growth of small businesses and fostering environmentally sustainable development in the country. By focusing on renewable energy, inclusive economic growth, and climate resilience, this investment will play a vital role in building a sustainable future for Madagascar, benefiting local entrepreneurs and communities, while contributing to the country’s broader sustainability goals.