Peter Tropper is the chief investment officer, private equity funds, at the International Finance Corporation (IFC), a member of the World Bank Group. He oversees US$2-billion fund in South Asia for the IFC. He is currently in Nepal to launch Business Oxygen (BO2), first small and medium enterprises venture fund, in which IFC has invested $7 million. Republica caught up with him on Tuesday to discuss various aspects of the venture fund and the situation of small and medium enterprises sector in Nepal. Excerpts:
How did Nepal qualify for the venture fund project?
We were looking for countries that did not have a well-developed financial sector, especially those where equity market for small businesses was not available. Since nobody was providing this sort of support to small businesses, we stepped in.
What will be IFC´s role in the venture fund?
One is to train the fund managers. We will bring our experience from overseas and put it here so that these guys know what is going on. It is also very important to take these people to other countries where venture funds are being operated in a similar environment. Second is to provide technical assistance to people who have received the venture fund´s support.
What´s your stake in the venture fund?
It´s a $14-million fund and we´ve put in $7 million. So we are looking for other investors to put in $7 million in the fund.
Who will mobilize the remaining $7 million?
It´s the job of Business Oxygen, the fund manager. We want lots of individuals and companies here in Nepal to contribute to this fund.
You´ve entered Nepal at a time when the investment climate is not that great. How optimistic are you about the venture?
IFC works in countries all over the world with all sorts of political situation. This is not new to us. What is important is that small businesses thrive regardless of what´s going around them. The politics and the government do not matter much to them because they are focused on their own businesses. And on top of that they need money to grow. So investments in SMEs are really good investment.
So you´re confident about taking back your investment with returns.
Oh sure. That´s what we do. Our job is to promote the private sector. And the only way to promote the private sector is by investing in companies that are successful. Yes, sometimes we make mistakes, but not very often.
You manage a $2 billion fund at IFC. Are any more similar projects in pipeline for Nepal?
No. Not for now. We are going to put all our efforts into this one. And I´m hoping that this venture becomes successful, so that others can follow. So our priority here is not to promote one particular company (Business Oxygen) but to get the private sector going.
How do you evaluate SME sector here?
Over 90 percent of businesses in Nepal are SMEs. If you go to places like the US, 90 percent of businesses are big ones. It´s just the opposite here and from this perspective this is a deal flow for us. That means most of the companies operating in Nepal are eligible for the venture fund´s investment.