We are proud to welcome a new Impact Partner as FMO to sponsor Pymwymic Impact Days this year. The phrase ‘40-year old company with entrepreneurial spirit’ aptly describes FMO Entrepreneurial Development Bank – with an impressive four-decade track record of investing in companies, projects, and institutions in developing countries around the world. Entrepreneurially, FMO is also charting new territory by launching two new funds for public/private investment, building on experience to measure returns while bringing impact to scale.
While enjoying a stellar reputation amongst impact practitioners, the real work and impact of FMO is not widely known in Europe. Typical Dutch modesty, we realize. Like Oikocredit and Stichting DOEN, these organizations have been making significant impact quietly, for decades. Nanno Kleiterp, CEO of FMO will use Impact Days to re-introduce the work of FMO “Ultimately, we’re seeking to contribute to a future in which 9 billion people can live harmoniously. A world that has achieved a sustainable way to live, produce, and consume. A world in which people have a life worth living. Realizing this is our purpose. It’s what motivates and guides us.”
The statistics are impressive: the bank is a public-private partnership with 51% shares owned by the Dutch government and 49% by commercial banks, trade unions, and other private sector parties. FMO’s mandate is to invest at least 35% into the 55 poorest countries in the world, and investments are predicated by stringent Environmental, Social and corporate Governance (ESG) guidelines. FMO has been awarded AAA-status by Standard & Poor’s and been ranked number 1 for sustainability in a peer group of 24 financial institutions, including the World Bank and European Investment Bank. But FMO is definitely not resting on its past, it is taking 40 years of experience into the future.
“Our goal is to be the leading DFI impact investor by 2020. We aim to do this by doubling our impact and halving our footprint,” explains Kleiterp. “We are measuring impact in deeper contexts. We believe that entrepreneurship is critical in creating sustainable economic growth and ensuring a better quality of life for people in emerging economies.”
For 40 years, FMO has been providing developmental finance across Africa, Asia, and South America, focusing on sectors with high long-term impact, including financial institutions, energy, agribusiness, and water. In so doing, they have not only built a reputation as one of the world’s leading DFIs alongside CDC (UK) and ICF (World Bank). More importantly they have built strong local networks and have deep experience with the dynamics and differences of all countries, and know how practically to create incentives for sustainable progress.
For example, in 2011 FMO announced a $20-million USD, 5-year senior loan to Banco Continental in Paraguay. The loan will allow the Paraguay’s second largest bank to finance small to medium enterprises in that emerging economy, thereby empowering entrepreneurs. Further, FMO is providing financial incentive for the bank to implement social and environmental management policies, which will guide their loan decisions and administration.
FMO’s participation frequently serves to catalyze inflow of other capital, as FMO’s hands-on experience in smaller and traditionally higher-risk markets can give other financial institutions and private investors the confidence to invest alongside. This is also the opportunity currently presented with the new funds.
The new FMO Fairview Africa Fund of Fund leverages the development bank’s deep experience in Africa while paving the way for participation in the tremendous growth story that is Africa today. The fund will invest across the continent in private equity funds, including up to 20% co-investments. It will leverage local fund managers and have a target of USD 200 million. First close is expected by the third quarter 2013.
A second fund is the SNS-FMO SME Finance Fund, investing in senior and subordinated loans to financial institutions globally that are SME-focused. Three Dutch pension funds are already committed to this fund, and a first close is expected by second quarter 2013.
This is an exciting period of change for FMO. As Kleiterp says, “We know that finance can make a big contribution to necessary changes in the world. We believe that empowering entrepreneurs, by investing in the private sector is the best way to achieve this sustainably. It cannot be just left to politics. We need to do this together.”