Bank loan

Dutch development bank FMO wants to increase loan guarantees in fragile states

Nasira was first introduced by the European Commission in 2018 as a loss-sharing system between the FMO and financial institutions on risky loan portfolios. It aims to expand the range of loans in developing countries that are viable for banks and microfinance lenders.

The program has so far been used in partnership with lenders including Equity Bank and Sidian Bank in Kenya, and Sasfin in South Africa. The FMO wants to deploy it in fragile African states, with the Sahel countriesthe Democratic Republic of Congo (DRC) and mozambique among the candidates who could be considered, the director of the FMO Huub Cornelissen tells The Africa Report. The program is currently worth $190 million and the goal is to grow it to $500 million in 2024.

Financial institutions are needed to reach the “bottom of the pyramid,” including through microfinance, Cornelissen says. “An economy cannot develop without financial institutions. Access to financial services in Africa is far from what it should be.

effective government is needed to provide a supportive environment if the program is to work, says Cornelissen. Countries in Asia and Latin America currently tend to have better enabling environments than some places in Africa, which means deploying Nasira in Africa’s fragile states is a long-term goal, he adds. -he.

FMO currently invests an average of around €2 billion ($2.1 billion) per year across all of its markets. About a third of that goes to Africa, making FMO one of the largest Dutch investors on the continent. This proportion is likely to increase slightly in the coming years, Cornelissen says.

The bank believes that its financing has also mobilizes an additional €1.5 billion private sector investment in all markets, which otherwise would not happen. The goal, Cornelissen says, is to increase that amount above the level of funding that FMO provides itself.

  • Rianne Heijboer, FMO’s regional manager for Southern Africa, highlights recent investments, including the Egyptian renewable energy producer Scatec and Babban Gonaan agricultural services company that works with small maize farmers in northern Nigeria.
  • The goal is to use FMO’s “stamp of approval” to raise private capital, she says.
  • FMO’s venture capital fund currently has acceleration programs for start-ups in countries like Nigeria, Ghana, Morocco and Tanzania. He wants to expand the use of accelerators to more countries, adds Heijboer.

Bankable projects

The FMO, which has a triple-A rating from Fitch and Standard & Poor’s, focuses on three sectors where it believes it can have the greatest impact: financial institutions, energy and agri-foodand Food and water. The bank says it only invests when the private sector would not otherwise.

The bank has investments in approximately 85 countries around the world. The Dutch government has a majority stake of 51%. Dutch banks Rabobank, ING and ABN Amro hold 42%, with the remainder held by employers’ associations, trade unions and individual investors (7%). The FMO, led by the CEO Michel Jongeneel who took office in September, is currently working on a new 2030 strategic plan which will be ready by the end of 2022.

  • The bank sees impact and profitability as complementary rather than contradictory goals, and has not received funding from its shareholders for about 20 years. “We grew because we made profits,” says Heijboer.
  • Project investments usually range from 2 to 150 million euros, or even more.
  • Finding entrepreneurs with bankable projects, rather than funding, is the constraint to expanding FMO’s impact. “There is a lot of money to invest in Africa, but not enough bankable projects,” Cornelissen says. FMO is looking for more partners to develop these projects, he adds.

The bottom line

FMO believes it can help attract private sector investment into fragile African states – provided there is a functioning and effective government.

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