IFC to invest in Philippine SMEs

The investment arm of the World Bank will invest up to $15m in Manila-based private equity firm Sierra Madre.

The International Finance Corporation, the investment arm of the World Bank, plans to invest up to $15 million in Philippines-focused private equity firm Sierra Madre, according to an investment disclosure on its website.

The IFC will invest in the debut fund of Sierra Madre, Sierra Madre Fund I, which aims to raise $120 million to invest in small and medium enterprises in the Philippines. The firm’s commitment is capped at 20 percent of the fund’s total commitments, it said in the filing.

The investment in Sierra Madre comes barely a week after the firm said it would invest $125 million in New Delhi-based Hero Future Energies, the renewable energy arm of the Hero Group.

The IFC has also been ramping up its investments in India and south-east Asia in recent months.

In May this year, the IFC teamed up with Hong Kong-based ADM Capital to launch a $200 million lending platform to support small and medium enterprises in Asia that do not have access to bank financing. In the same month, the firm said it would invest around 10 percent or $7.5 million in Cambodia-Laos-Myanmar Development Fund II, a 2016-vintage vehicle managed by Singapore-based Emerging Markets Investment Advisers. And in April, the IFC invested up to $18.3 million in Vietnam’s Tien Phong Bank, and teamed up with New York-headquartered private equity firm Apollo Global Management to set up a $1 billion distressed assets vehicle to invest in emerging markets globally.

Sierra Madre will invest at least $5 million per transaction in strong growth industries in the country such as consumer, retail, and education.

The firm was founded early this year by Alasdair Thomson, previously a partner at Morgan Stanley Capital Partners and a senior principal at Apax Partners in Europe, as well as Filipino businessman Martin Lorenzo, according to its website.

Private equity in the Philippines is in its early stages, with only a handful pan-Asian firms making investments in the country, including CVC Capital Partners, which acquired business process outsourcing (BPO) service provider SPi Global; Capital International, which invested in media and entertainment giant ABS-CBN; and Baring Private Equity Asia and ADM Capital, which last year constructed offices near Manila’s airport.

Investors are still ‘cautiously optimistic’ about investing in the Philippines due to corporate governance issues and business sectors almost entirely monopolised by a few political elite families.