NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

The International Finance Corporation (IFC) and the U.S. International Development Finance Corporation (DFC) are investing $15 million in Antigua-based Pomona Impact Fund II to support the growth of small and medium-sized enterprises (SMEs), create jobs, and boost economic development primarily in Central America.

IFC and DFC’s backing, with $7.5 million in equity investment from each institution, will enhance Pomona’s support for SMEs in the agriculture, education, health, and water sectors, among others. The $30.5 million fund will provide organizational and operational support for businesses and help create value, while also promoting women-owned and managed companies. Mainly focused on Central America, the fund will also evaluate relevant projects in Mexico, Ecuador, and Colombia.

“We are delighted to deepen our relationship with IFC and DFC, which has proven crucial to reach our fundraising target in a challenging environment,” said Richard Ambrose and Daniel Granada, Managing Partners of Pomona Impact Management, the fund manager. “Their support will send a strong signal on the opportunity in Central America. It will also help us generate deal flow and demonstrate attractive commercial returns from investment in the market, especially the SMEs segment.”

The investment aims to help develop the nascent private equity industry in Central America. In recent years, almost all funds raised in Latin America have focused on the largest economies in the region, such as Brazil, Mexico, Chile, and Colombia. Funds like Pomona Impact Fund II focus on smaller markets facing challenges raising capital from local and international investors.

“By promoting the sustainability and growth of SMEs in Central America—particularly SMEs that tend to be underserved, including women-owned SMEs, very small enterprises, or climate-smart SMEs— we can encourage other investors to do the same,” said Sanaa Abouzaid, IFC Regional Manager for Central America. “We do this by making direct investments and supporting funds like Pomona. We share their vision that SMEs are a driver of job creation and economic development outcomes in the region.”

“DFC is committed to providing impactful investments in Latin America to bolster economic prosperity, improve livelihoods, and strengthen shared ties with the United States,” said Mateo Goldman, Acting Head of DFC’s Office of Equity and Investment Funds. “Through strategic investments with partners like IFC and the Pomona Impact Fund II, DFC can increase its support for small businesses and address pressing challenges impacting northern Central America.”

IFC’s $7.5 million investment includes $6.5 million from SME Ventures—an IFC program launched in 2010 to support private equity funds focusing on SMEs in underserved private capital markets— and $1 million from the Women Entrepreneurs Finance Initiative (We-Fi), which works with the private sector to enable female entrepreneurs to start and grow businesses. IFC and DFC will help Pomona integrate gender elements into its mainstream fund and implement environmental and social best practices. Pomona has committed to allocating at least 30 percent of amounts committed to the fund by DFC in women-owned or led companies.

DFC supports countries facing significant gaps in development by creating inclusive and sustainable economic opportunities. In Northern Central America, DFC aims to improve livelihoods and advance U.S. priorities, including by addressing the root causes of irregular migration. DFC will work with Pomona to advance investment in small businesses to grow economic opportunity and address pressing challenges impacting the region. Pomona has committed to investing at least 50 percent of investable capital in Northern Central America.  

Photo courtesy of UN Women.