UK development financiers CDC Group launched a US$5 million private equity investment in Sierra Leone to provide funding to entrepreneurs.

The Sierra Investment Fund (SIF), the first of its kind in the West African nation, is available to small and medium sized enterprises (SMEs).

The launch of the fund precedes a major Sierra Leone investment conference scheduled for 18 November in London, and aims to attract private sector investment into the country.

Sierra Leone has recorded economic growth averaging 7% annually over the past five years despite a chronic lack of access to credit. Its inadequate infrastructure and a shortage of managerial skills has kept foreign direct investment flows low.

"CDC's commitment to private sector investment will encourage entrepreneurial talent to establish and grow businesses, which in turn will increase employment and reduce poverty," said Rod Evison, managing director for Africa.

SIF will acquire stakes in firms that have high growth potential in sectors including agribusiness, tourism, transportation and training. The fund has already made investments in local businesses including a local ice producer, and Sierra Fishing Company - the largest fishing business in the country.

The fund hopes to invest between US$20m and US$30m in both established SMEs and start-ups over the next few years.

"Our investment in this fund will offer a rare opportunity for SMEs. There is significant untapped potential in many sectors in Sierra Leone where underinvestment and low levels of competition have resulted in limited choice," said Richard Laing, CDC's chief executive.

CDC is the UK government-owned development finance institution and plays a key role in the Department for International Development (DFID)'s strategy to develop the private sector in poor countries.