In developing countries, it is often difficult for companies and SMEs in particular to obtain financing. Despite their great growth potential, many of them face financial constraints. That is why SECO works to promote access to financing for companies so they can invest, tap into new markets, grow and create decent employment opportunities.
In order to achieve these goals, SECO takes a number of different approaches:
Providing capital
SECO provides capital to companies through the Swiss Investment Fund for Emerging Markets (SIFEM), the development finance institution of the Swiss Confederation, and through the SECO Start-up Fund.
Founded by SECO in 2011, SIFEM is the development finance institution of the Swiss Confederation. It provides long-term financial support to established SMEs and fast-growing companies in the form of shareholdings, loans and expertise. SIFEM does this in collaboration with other public and private investors. In doing so, it promotes the growth of companies and creates jobs and income opportunities. In the long run it thus contributes to increased demand for economic reform and an improvement of the business environment. SIFEM and its portfolio companies have created approximately 900,000 jobs to date.
The SECO Start-up Fund helps companies based in Switzerland finance the start-up phase of investment projects in SECO partner countries through redeemable bonds. The projects must be economically viable and meet environmental, social and governance standards. So far, the SECO Start-up Fund has created more than 16,000 jobs and mobilised approximately 360 million Swiss francs in investment. Roughly 35 per cent of the projects in the credit portfolio are implemented in Africa.
SECO is supporting financial institutions in providing loans that take environmental, social and governance factors into account.
Triggering reforms
SECO supports efforts to reform local framework conditions and create new financial products. It also enables companies to access innovative financial technologies.
SECO promotes innovative financial services in order to integrate poorer sections of the population in the financial system. In Ghana for example, it is assisting with the set-up of a mobile payment system. The latter makes it easier to pay bills, because the need to take a bus journey to the nearest bank becomes redundant. Furthermore, migrants and their families benefit from reduced transfer costs when making oversea transfers via mobile phone.
Financial services should be equally accessible to both men and women. This is why SECO promotes financial products tailored to the specific needs of female entrepreneurs and businesswomen.
Women run around one third of the one million small and medium-sized enterprises in the Middle East and North Africa. However, these companies only have access to less than 10 per cent of the existing commercial funding opportunities. In order to reduce this inequality, SECO and the International Finance Corporation (IFC) have launched the Women Banking Champions programme. The programme seeks to enable female entrepreneurs in Egypt, Morocco and Tunisia to access financial services such as loans and business accounts. It raises awareness and trains female entrepreneurs in business and financial planning as well as management. It also promotes dialogue between various stakeholders with networking platforms.
SECO works with other actors to develop financial services, which are tailored to the needs of female entrepreneurs.
Financing SDGs on a sustainable basis
SECO is committed to mobilising private capital to achieve the Sustainable Development Goals (SDGs). To this end, it has joined the partner network of Swiss Sustainable Finance (SSF), the association for sustainability in the financial sector. Since the 2000s, SECO has been committed to impact investments. Another key approach employed by SECO is the use of green bonds to drive climate financing in emerging economies.
The issuers of green bonds use the funds received to finance environmental and climate protection measures. SECO has been supporting the IFC Green Bond Technical Assistance programme since 2018. It seeks to improve the framework conditions for green bonds, offer training programmes for banks in emerging economies and promote better standards and transparency.
SECO mobilises knowledge and capital for sustainable infrastructure services in areas such as mobility, water and energy. For the private sector to be competitive and create jobs, an effective, climate-resilient infrastructure is crucial. In developing countries, the public sector often lacks the funds to finance infrastructures projects on its own and actors do not have sufficient knowledge on infrastructure financing. That is why partnerships with the private sector are important.
Switzerland – represented by SECO – has been a member of the Private Infrastructure Development Group (PIDG) since 2002. PIDG promotes the involvement of the private sector in infrastructure projects. By mobilising funds from the private sector, PIDG helps to bridge the funding gaps for infrastructure projects in developing countries in Sub-Saharan Africa and Asia. The work of PIDG has provided more than 200 million people with access to new or improved basic infrastructure and created more than 300,000 jobs. The Swiss private sector benefits from working with PIDG too. Thanks to PIDG, Swiss companies have been able to conclude supplier and service contracts totalling more than 36 million US dollars. PIDG is funded by the UK, the Netherlands, Switzerland, Australia, Sweden and Germany as well as the IFC.
