news - FMO’s Government Funds: High Risk, High Impact

FMO publishes Annual Reports of its Government Funds; Access to Energy and Building Prospects mandates extended with 10 years

The Dutch government funds MASSIF, Access to Energy (AEF) and Building Prospects have published their annual reports. These funds are managed by FMO for many years now and enable us to invest early on, to take high risks, and by doing so to mobilize new investors. Together we can deliver on our strategic goal of achieving high development impact for people in developing countries. The government funds play a pivotal role in FMO’s suite of tools to make the difference in emerging and developing markets, as they allow us to realize often innovative projects that would otherwise not have been bankable.

Linda Broekhuizen, Chief Investment Officer at FMO: “The Dutch government is one of the pioneering forces mobilizing the role of the private sector. The funds we are entrusted with are an important missing link in the long road to achieving the SDGs; they can help to bridge the financing gap that prevents young and promising businesses from realizing their tremendous potential for impact.”

MASSIF, a fruitful year with 20 new investments that accelerate financial inclusion

A strong financial sector is indispensable to support economic development. MASSIF is a revolving fund that invests in the growth of financial institutions in the least developed countries, where businesses have little to no access to financial services because the financial sector is underdeveloped. We invest in fragile countries like Ivory Coast, Myanmar or Lebanon that are post-conflict, recovering from a natural disaster or are coping with a large influx of irregular migrants.

Through its 20 investments in 2018, MASSIF financed approximately 87,500 micro-entrepreneurs and 1,485 Small and Medium Enterprises.

The highlight of 2018 was the Dutch government’s decision to contribute EUR 7.5 mln to NASIRA, a risk-sharing facility managed by FMO for which the European Commission has approved up to EUR 75 mln in guarantees and up to EUR 8 mln in technical assistance. These funds are aimed at young, female and migrant entrepreneurs, including refugees, returnees and internally displaced people, within the European neighborhood and Sub-Saharan Africa. 

MASSIF combines impact with a healthy financial return; as a result, more financial institutions can be supported. The fund’s total committed portfolio now adds up to EUR 549 mln. The revolvability for MASSIF as of December 2018 is 138%.

For more information, visit: https://massif.fmo.nl/2018/

AEF: 10-year extension for high impact energy investments

In many fast-growing developing countries, the demand for electricity continues to rise whilst power infrastructure struggles to keep up.

The Access to Energy Fund is jointly initiated by the Dutch government and FMO in 2007 to support private sector projects aimed at providing long-term access to energy services in Sub-Saharan Africa. The Fund supports energy generation, transmission and distribution projects in developing countries, and focuses specifically on sustainable energy solutions, which is a focus area for FMO. 

Since December 2012, the Fund solely focuses on affordable, clean and renewable off-grid energy solutions for Sub–Saharan Africa.

Our main fossil fuel sources – oil, coal and gas – are finite natural resources, that are being depleted at a rapid rate. The need to find affordable energy solutions for all and produced in ways that can be sustained by the global economy and the planet, is therefore pressing.

The mandate of the Access to Energy Fund has been renewed by the Dutch Ministry of Foreign Affairs until 2028 including a top-up of EUR 40 million for 2019. The total committed portfolio of the Access to Energy Fund is EUR 110 million. With the signing of 4 new off-grid investments, the Fund has contracted EUR 13.5 million new productions in 2018. Approximately EUR 37 million of new leads are pending. Many of these leads are structured into high impact investments proposals complying with the new AEF investment strategy, encouraging smaller deal tickets and encompassing a wider global geographic scope.

For more information, visit: https://aef.fmo.nl/2018/

Building Prospects: increased focus on the agribusiness value chain and climate

Every country needs roads, ports, railways, sanitation, energy and communication systems to prosper and provide a decent standard of living for their population. The Dutch Ministry of Foreign Affairs renewed the mandate of FMO’s Infrastructure Development Fund (IDF) and topped the fund with EUR 100 million. A new strategy has been formulated as part of the mandate renewal, directing investments to agribusiness, infrastructure and climate change mitigation and adaptation. The fund will continue under a new name: Building Prospects.

Building Prospects is designed to drive private sector development through the creation of reliable infrastructure in many sectors, including agribusiness, energy, transport, ports, water, and social infrastructure. It follows an inclusive approach to reduce – particularly gender - inequality by financing companies that serve people at the base of the pyramid.

Each Building Prospects investment is additional, providing funding for initiatives that the market cannot fulfill due to elevated risk. With Building Prospects we can invest early on, taking high risks and by doing so, making projects possible with a high development impact that would otherwise not have been bankable.

Building Prospects invests in a total of 22 countries and 4 different regions and has an impact on an estimated 26.6 million beneficiaries. Over the years, Building Prospects has been instrumental in setting up telecom, off-grid energy, and more recently forestry projects. It continues to select new segments of the market that are underserved and are essential for economic development in developing countries.

The Fund provides risk-bearing capital: a full range of products including equity, subordinated loans, senior loans, and convertible grants in both local and foreign currency that can be tailor-made to make business cases bankable. Building Prospects is a relevant and impactful policy instrument. The Ministry of Foreign Affairs has contributed EUR 354.5 mln. As per 31 December 2018, Building Prospects had a total committed portfolio of EUR 418 million. The Fund has made over EUR 800 million commitments since 2002. The revolving nature of the Fund enables the continuous increase of impact.

For more information, visit: https://buildingprospects.fmo.nl/2018/