disseminated in the national press, to build legitimacy and mitigate pressure to undertake projects that do not fit these criteria. FONSIS may—if necessary to attract external capital to high-priority projects—use a return margin that exceeds the hurdle rate to enhance returns or mitigate risk for external investors. Also, exceptionally and subject to board approval, it may cross-subsidize one project (whose expected returns are below the hurdle rate but which has significant positive externalities) from a project with higher returns, so that the joint expected returns remain above the hurdle rate.

The **European Fund for Strategic Investments (EFSI)** started operation in 2015. The fund aims to help overcome the financing gap in Europe by mobilizing private finance for strategic investments, and acts as one of the three main pillars of the Investment Plan for Europe. With EFSI support, the European Investment Bank (EIB) group provides funding for economically viable projects where it adds value, including projects with a higher risk profile than ordinary EIB activities. Further, EFSI aims to strengthen the European regulatory environment and support the investment environment throughout Europe.

EFSI priorities include:

- Strategic infrastructure, including in the information technology, transport, and energy sectors

- Education, research, development, and innovation

- Expansion of renewable energy and resource efficiency

- Support for small and medium enterprises

Given its objectives, EFSI’s main measure of success is the amount of external investment unlocked by its guarantees for investment in the fund’s defined priority sectors. EFSI aims for a 1:15 multiplier on its investments for the aggregate investments generated. As of April 2016, EFSI approved 249 transactions in 26 of the 28 EU countries.

_<u>Sources:</u>_ Adapted from Inderst (2016a); Foce Consultora (2016); funds’ websites.

SIFs may also act as VC funds. The first state-sponsored VC fund programs were created by the U.S. and U.K. governments to improve financing for fast-growing young firms and foment post–World War II productivity. In the 1960s these funds represented the bulk of VC raised in the United States (Lerner, Leamon, and Hardymon 2012). Some of these programs are still functioning. For example, the Small Business Investment Company (SBIC) program, established in 1958, consists of federally guaranteed risk capital pools. State-sponsored VC programs are now seen in a growing number of EMDEs (EY 2015). In Senegal, Teranga Capital is an equity impact investment fund launched in 2016. The fund targets promising domestic SMEs, with financing needs between €75,000 and €300,000. In addition to long-term finance in the form of minority equity participation, Teranga Capital provides management coaching to support the growth and consolidation of the SMEs in its portfolio (sales and marketing; accounting; and environmental, social, and governance benchmarking). FONSIS invested in Teranga Capital as a limited partner alongside Investisseurs and Partenaires (the general partner and fund manager), Sonatel, Askia Assurances, and two private professional investors. Another SIF, the African Agricultural Capital Fund (AACF), provides growth financing to Africa’s undercapitalized agriculture sector through SME investments in East Africa. The AACF was created in 2011 by the United States Agency for International Development (USAID) and another six investors. Managed by Pearl Capital Partners, the AACF aims to invest $25 million through 7