SEAF Caribbean Growth Fund

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number

28527

Company name

SEAF Caribbean Growth Fund

Country

Latin America Region

(IDA)

Sector

Private Equity/Venture Cap Fund - Regional

Environmental category

Department

Reg Ind, Financial Markets, CAF/CLA

Status

Pending Disbursement

Date SPI disclosed	October 30, 2009
Projected board date	November 30, 2009
Previous Events	Signed: June 18, 2010 Approved: April 28, 2010

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

The project consists of an IFC equity investment in the Small Enterprise Assistance Funds (SEAF) Caribbean Growth Fund (the "Fund"), a pooled investment vehicle which would make equity and quasi-equity investments in small and medium-sized enterprises (SME) in the Caribbean. The Fund will have a target size of $50-60 million and is sponsored by SEAF. Its main objective will be to invest in and assist SMEs in the region, a concept which has received renewed interest from potential investors following the impact of the global credit crisis on SMEs in the region.

Anticipated development impact of the project

This project is in line with IFC’s overall strategy in the Caribbean which prioritizes an investment program for the development of capital markets and institution building, infrastructure, general manufacturing and services with emphasis on increased private sector development and strengthening and improving the access to finance for SMEs. The project is expected to: (i) help strengthen the efficiency and competitiveness of domestic private enterprise, particularly SMEs, including supporting regional expansion; (ii) increase access to finance for SMEs; (iii) support capital markets development locally and regionally, including increased cross-border flows; (iv) IDA impact as Fund’s area of operations will cover OECS - Dominica and possibly St. Lucia and Grenada.

IFC's expected development contribution

Catalytic and countercyclical role: An IFC commitment to the Fund will signal confidence in these markets and motivate other institutional investors, especially after investor confidence has been affected by the bankruptcy of the Clico and Stanford financial groups.
Assist the Fund in broadening its geographic reach: IFC’s regional team will attempt to help the Fund manager extend its operations to the Eastern Caribbean. IFC’s support will give the Manager additional comfort in pursuing opportunities in the OECS which would be a first not only for SEAF but also for private investments in these regions.
E&S oversight: IFC will introduce its Performance Standards in Environmental and Social practices in the Fund’s legal documents and help the Fund manager practice sustainable investing. IFC is the only investor able to advise on establishing an environmental and social management system.

Environmental and social issues - Category FI

This project involves IFC support for a regional fund to make equity and quasi-equity investments in small and medium-sized enterprises (SMEs) and has been classified as a Category FI project. SEAF is an existing IFC client and other SEAF funds are overall in compliance with IFC environmental and social requirements.

During appraisal, IFC analyzed the fund’s expected portfolio and sectors of investment and determined the Applicable Performance Requirements would be a combination of: the IFC FI Exclusion List, the applicable National Social and Environmental Laws and regulations and the IFC Performance Standards. SEAF is currently upgrading its Social & Environmental Management System (SEMS) to meet the IFC Performance Standards. The implementation of the upgraded SEMS for this fund will be a condition of disbursement. In addition, the fund manager will be required to: identify responsible, qualified persons to manage and implement the SEMS; commit to maintain this SEMS to ensure that its investments are in compliance with the Applicable Performance Requirements; and submit a periodic report to IFC as per a format to be provided by IFC.

For all Category A subprojects, the Fund will need to satisfy IFC, that the subprojects are in compliance with the Performance Standards or have a satisfactory action plan to bring the subprojects in to compliance within a reasonable time frame prior to investing.

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