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Burkina Faso is home to a vast informal micro, small and medium enterprise (MSME) sector that includes over 1.4 million businesses. However, of the 65,000 formal enterprises in the country, only 500 generate an annual turnover exceeding CFAF 1 billion (US$1.8 million). The country has been facing a deteriorating security landscape while also witnessing a staggering increase in internally displaced persons (IDPs). A US$12 million Global Risk Financing Facility (GRiF) grant, embedded within a larger US$100 million World Bank operation, supports Burkina Faso’s MSMEs by facilitating continued access to credit during a climate-related shocks, so they can continue business activity after the shock. This grant supports Burkina Faso’s crisis window to be open during climate-related crises within an existing Partial Credit Guarantee Scheme (PPCG), and to create a linked loan restructuring facility, primarily aiming at safeguarding banks and microfinance institutions from the compounded risk of drought and other significant climate risks.  

Building resilience of the MSME sector

The newly introduced Crisis Response Window within the credit guarantee fund was first financed by US$10 million International Development Association (IDA) resources tailored to aid small businesses severely impacted by the COVID-19 pandemic. This initiative has become fully operational and safeguards a US$3.52 million loan portfolio affected by the COVID-19 crisis. Designed to cover restructured loans, with the support of the US$12 million GRiF grant, it also offers short-term working capital to MSMEs showing resilience and potential to recover from climate-related challenges such as droughts. Moreover, the country is collaborating with the African Development Bank and the African Risk Capacity to train key decision-makers in the fundamentals of disaster risk finance (DRF) and to undertake a comprehensive DRF diagnostic. These activities are laying the foundation for a more resilient Burkina Faso.

Complementary initiatives
 
The upcoming GRiF-funded crisis window channel for climate-related shocks will complement other initiatives supporting the agricultural sector’s access to finance and its climate resilience. These combined efforts will provide comprehensive support to address the multifaceted challenges faced by the nation’s MSMEs.

Enhancing the PPCG

The Global Shield Financing Facility (GSFF)’s contribution has bolstered Burkina Faso’s PPCG, which initially had US$35 million in capital. This fund guarantees bank and microfinance institution loans to MSMEs, businesses in the agriculture sector, and women entrepreneurs. It creates a safety net for these vital enterprises, allowing them to access essential financial resources.

GSFF is playing a pivotal role in securing the future of Burkina Faso’s MSMEs and strengthening the country’s overall resilience to climate risks. By strengthening credit guarantees, providing crisis response mechanisms, and fostering comprehensive DRF strategies, GSFF is helping to ensure that these vital enterprises continue to thrive, even in the face of adversity. Beyond merely shielding businesses, this comprehensive support aids in fortifying the nation’s economic pillars, propelling Burkina Faso toward stability and growth.