Foreign banks that have retrenched since the financial crisis are still averse to risk in the growth markets of Latin America, sub-Saharan Africa and South Asia. Local banks focus on short-term working capital.
That has created a “large dislocation and a funding gap,” for growth-stage companies in such markets, according to Christopher Wilder, a managing director at Abraaj, the $10 billion private equity firm based in Dubai. As a result, Abraaj will use debt-financing to fuel growth in companies in logistics, healthcare and education, to help prepare them for investments from Abraaj’s private equity team. Abraaj’s “growth credit” aims to “provide solutions across the capital structure,” he says.
Abraaj’s focus on larger companies means financing gaps will remain for smaller businesses in emerging markets, as detailed in ImpactAlpha’s Fellow Travelers series last month.
But it starts to fill an important gap for larger companies aligned with the U.N. Sustainable Development Goals, which Arif Naqvi, Abraaj’s founder, says are a “phenomenal investment opportunity.”