Norfund has, together with Shuraako, a program of One Earth Future, and the Danish development finance institution, IFU, have launched the Nordic Horn of Africa Opportunities Fund.
The $10m fund is among the first commercial investment funds for supporting small and medium sized companies in Somalia.
Norfund is the initiator and anchor investor of the Fund and has committed an investment of up to $5m, whereof the Norwegian Ministry of Foreign Affairs has supported a first loss component of $3m.
In addition, IFU and the Arsenault Family Foundation have committed $2m each.
Other partners include the Development Fund (Utviklingsfondet), a Norwegian NGO active in Somalia and with a network of Nordic Somali Diaspora.
Marcel Arsenault, Founder and Chairman of One Earth Future and the Arsenault Family Foundation, said “We really appreciate this initiative from Norfund. I believe the Fund will grow over time as new investors join. There is already a promising pipeline of investors that have shown interest to join over the next three to six months.”
The Nordic Horn of Africa Opportunities Fund is expected to have significant development impact by enabling Somali entrepreneurs to build sustainable businesses, contribute to their country’s economy and tax base, and create a significant number of jobs within their communities.
The primary investment instrument will be the Sharia compliant “Murabaha” and the average deal size will be $250,000.
The capital will flow to all regions of Somalia into companies in various sectors including but not limited to fisheries, agriculture, light manufacturing, hospitalities and energy.
Tommy Thomsen, IFU CEO, said: “Small companies are strong drivers for job creation and economic development, but often don’t have access to finance. IFU is very pleased to invest in this new fund, as it will provide loans and enable small businesses to grow in Somalia, which is one of the least developed countries in the world.”
The business environment in Somalia is one of the most challenging in the world.
Access to capital is constrained, electricity is not generally available, minority protection of investors is problematic and parts of the country have major security and terrorist challenges.
There are few international investments and establishments in the country.
However, Somalia is now recovering from civil war and rebuilding the Somalia’s legal framework to attract more investment.
In this context the Fund will fill a gap by funding SMEs that have no other sources of capital.
The fund is the first of its kind and will demonstrate the potential to catalyze further capital into Somalia.
Kjell Roland, Norfund CEO, said: “This is an important investment for Norfund and an example of how it is possible to do sustainable investment in some of the world’s most fragile states. We believe the fund will have significant development impact in Somalia and also achieve a small yet positive and financially sustainable financial return.”
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Africa Global Funds (AGF) is a monthly magazine for asset management professionals and institutional investors worldwide interested in the African continent. AGF was created as a relevant and engaging resource that can provide readers with an insight of what is going on in the African asset management space. Drawing on an intense dialogue with a constantly expanding group of key decision-makers in the industry, we cover traditional and alternative asset classes of African asset management. From this dialogue we work hard to produce a compelling blend of hard news, incisive commentary, detailed sector and regional reports, exclusive interviews and proprietary data.
