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Norfund

Overview:

Norfund (Norwegian Investment Fund for Developing Countries) is an investment company intended to develop and establish profitable and sustainable enterprises in poor countries. The objective is to promote business development and contribute to economic growth and poverty alleviation. Norfund operates in some of the world’s poorest countries and invests in markets where ordinary commercial enterprises are often reluctant to venture alone because of the high risk. Norfund invests equity, directly in enterprises and indirectly through funds, as well as providing loans to individual companies.

Norfund is a hybrid company with limited liability established and operated under special legislation (the Norfund Act ) and owned by the Norwegian Government through the Ministry of Foreign Affairs. Norfund acts as a key instrument of Norwegian development policy, and the Storting (Norwegian parliament) allocates annual capital grants to Norfund in its development assistance budget.

Norfund’s investments are divided into four investment areas: Financial Institutions, SME Funds, Renewable Energy and Industrial Partnerships. The organization currently has a staff of 40 distributed between the main office in Oslo and regional offices in Johannesburg, Nairobi and San José (Costa Rica). At the end of 2009, Norfund had a committed portfolio of NOK 5.3 billion.

Norfund’s main regions of activity are eastern and Southern Africa. In addition, Norfund invests in Central America and selected countries in South-East Asia (Bangladesh, Laos, Cambodia and Vietnam).

Norfund succeeds in its goal of creating sustainable development and alleviating poverty because we undertake profitable investments that give rise to viable enterprises. This is achieved mainly with the aid of our solid professional skills in the field of investment, combined with sound knowledge of the frameworks prevailing in the countries and sectors in which we invest, the enterprises and their managements, and the partners with whom we co-invest.

History:

Norfund was established as a company under special law under the Ministry of Foreign Affairs in 1997. Here is some background on the establishment and history of Norfund:

In 1995, the North-South/Development Aid Commission argued that Norway ought to establish an investment fund as a key instrument of its development policy. For some years, NORAD had provided loans to Norwegian enterprises that established themselves abroad, but was restricted by its mandate from providing equity to companies. At that time Norway was one of very few Western European countries that did not have a development finance institution (DFI). The proposal to establish Norfund was submitted to the Storting as a separate matter in Proposition No. 13 to the Odelsting chamber (1996-1997), and the Norfund Act was approved on 9 May 1997 (No. 26).

The Norwegian Investment Fund for Developing Countries (Norfund) was established by the Storting in 1997, with the objective of alleviating poverty by investing in and providing loans to profitable and sustainable companies, thereby contributing to economic development and growth in private enterprise. It was to operate in countries with limited access to commercial finance owing to the reluctance of ordinary commercial entities to invest because of high risk.

Since its establishment, Norfund’s annual capital contribution has increased from NOK 175 million in 1998 to NOK 585 million in 2009. Capital is allocated to Norfund by the Norwegian Government through the Ministry of Foreign Affairs.

A key premise for the establishment of Norfund was the understanding that development assistance needs to contribute more to developing a productive private sector and thereby long-term economic sustainability. Norfund was initially restricted to co-investing with Norwegian partners, but this restriction was lifted in 2002. Now Norfund can never be the majority owner, but is free to co-invest with both Norwegian and international partners.

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