By investing in banks, microfinance and other financial institutions, Norfund contributes to increased financial inclusion and in particular to more jobs in small and medium sized companies.
Key achievements in 2021
new clients served
increase in lending to clients
Inclusive financial systems provide businesses and individuals with greater access to resources to meet their financial needs, such as capitalising on business opportunities, investing in homebuilding or education and managing unforeseen circumstances.
In low- and middle-income regions, the financial sector is often underdeveloped. Businesses and individuals have limited access to basic financial services, such as bank accounts, payment services and credit facilities. Across developing countries, it is estimated that 65 million formal Micro-, Small- and Medium-sized enterprises (MSMEs) have unmet financing needs, and about 1.7 billion adults remain unbanked.
Banks and microfinance institutions rely on access to debt and equity when extending loans to their clients.
Increasing the availability of capital enables them not only to grow existing credit facilities, but also to develop products, increase their market reach and pay for costly yet crucial capital investments. IT systems for example are expensive, but are needed to provide high-quality, effective, and secure services.
Norfund provides debt and equity to financially viable banks and microfinance institutions that want to grow appropriate, valuable services in our core countries.
Our investments are made both directly and through investment platforms and funds and focus on growing locally owned financial institutions.
In response to the COVID-19 pandemic, Norfund’s strategy is to help our countries’ own banking systems to become better positioned to provide additional loans to businesses to see them through the crisis. Our investments in banks target medium-sized and large banks that have a focus which includes SMEs and the retail market and have clients who previously lacked access to financial services.
Our main vehicle for equity investments in African banks is Arise, a 1 billion USD bank investment company in which Norfund owns more than 40 percent of the shares. We invest directly in microfinance institutions in our core countries as well as indirectly through the Nordic Microfinance Initiative (NMI).
Norfund has defined two ambitions for its direct investments in financial institutions for the strategy period 2019 – 2022:
- Offer financial services to 15 million new clients
- Extend 130 billion NOK more in loans to clients
Accumulated achievements 2019 – 2021
Million new clients
Increased lending (BNOK)
Investments and Results in 2021
Norfund is invested directly in 61 financial institutions (FI), ranging from regional banking groups and funds that invest in banks to local microfinance institutions.
committed in 2021
committed in total FI portfolio
23.1 million new clients provided with financial services during the strategy period
Taking into account investments only and companies with two consecutive years of reporting, the number of new unique clients reach 23.1 million with accumulation from the previous years. There was 450 billion NOK in total deposits by the end of 2021.
106.9 billion NOK increased loans to clients during the strategy period
With a 48.5 billion NOK increase in lending (12% growth) during 2021, on top of accumulation from previous years, the total lending volume reached 464 billion NOK. Of this, 106.9 billion NOK was accumulated during the strategy period 2019-2021 thus far.
7.6 million clients were provided with credit, of which 4.2 million were retail customers, 2.1 million were microfinance clients, and 528,000 were loans to SMEs.
Investments per region
In 2021, a total of 12 commitments were signed with financial institutions in Sub-Saharan Africa, Asia and Latin America.
Investments per region in 2021
Total Portfolio per region
COVID-19: A cautious recovery
The start of the pandemic in 2020 posed challenges, including a liquidity crisis for several of the microfinance institutions with which we are involved, in response to which Norfund provided additional short- and medium-term loans as well as additional equity. However, 2021 heralded a cautious pick-up after the initial slowdown. Though there were concerns banks would not be able to pay back their loans, there were in fact no COVID-related payment defaults during 2021. The portfolio developed positively during this period, and Norfund made eight new loans, in addition to the previous portfolio.
Another challenge during 2021 was the economic situation in Myanmar, precipitated by the military coup early in the year. Though the country had been a major focus for several years, economic development has now slowed. Norfund maintains three investments in the country with Yoma Bank and the microfinance institutions Myanmar Finance and Advans Myanmar. However, due to the economic slowdown there have not been any new investments in the area in 2021, and we have lengthened loans that could not be paid back in time.
Highlights of 2021
new investee companies
In 2021 the biggest single investment was through Arise, Norfund’s main vehicle for large scale equity investments in banks in Africa. Arise is a unique specialized investment company with a growing portfolio of leading financial institutions across sub-Saharan Africa, established in August 2016 when its four founding owners – Norfund, Rabobank, FMO and NorFinance – agreed to transfer their various equity holdings in financial institutions in sub-Saharan Africa.
The aim of Arise is to contribute to the building of economic growth and poverty reduction by developing strong and stable financial service providers.
In 2021 Arise completed a USD 75 million investment in Alternative Tier 1 (AT1) capital into ETI, the holding company of Ecobank. This was a ground-breaking deal and the first AT1 investment ever in Sub-Saharan Africa outside of South Africa.
ETI was founded in 1985 and progressively expanded its presence across 33 sub-Saharan Africa countries. Ecobank has a strong brand recognition through a substantial network of over 24 million customers served by some 14,000 employees and 690 branches across the continent.
Access to high quality, affordable financial services is essential for social and economic development, gender equality, resilience, and livelihoods. Unfortunately, globally around 1.7 billion people are unbanked. It is also a gender issue: women are disproportionately affected, with around 1 billion lacking access to financial institutions. Additionally, lack of financial access is an issue for businesses: 70% of SMEs cite lack of access to finance as a barrier to growth.
While many individuals may not have access to financial services, two out of three of them have mobile phone access, making this a useful tool to bridge this gap. FinTech can increase the breadth of available financial services. Our mandate is to increase financial inclusion, making FinTech a natural area of interest for Norfund.
In 2021 several commitments were made in this area:
- Norfund committed 65.4 million NOK to Amartha, a peer-to-peer lending platform in Indonesia with a focus on funding rural women. Amartha has disbursed more than USD 250 mill and empowered 678,502 women across more than 18,900 villages in Jawa, Sumatra, and Sulawesi. Norfund’s senior loan to the company is an initiative to help them provide microcredit to many more female micropreneurs in the bottom of the pyramid and to promote financial inclusion of the unbanked in Indonesia. In addition to providing capital, Norfund will provide technical assistance and global expertise assisting Amartha to promote global environmental and social standards.
- Quona Capital, a venture firm focused on financial inclusion in emerging markets, announced the Accion Quona Inclusion Fund in 2019 which Norfund then invested into. The fund invests in financial technology companies to increase access to financial services for businesses and consumers in developing countries. Norfund committed an additional 15 million NOK to a new fund, Quona III, in 2021 with the same investment focus.
- 41.3 million NOK was committed in a loan to Lula Lend, a technology driven financial institution with a credit scoring model that enables them to more efficiently assess the risk of SMEs in South Africa. Lula Lend is able to offer credit to underserved and financially excluded SMEs, many of them accessing credit for the first time. Accion Quona is a shareholder in Lula Lend.
Increasing SME’s access to capital in Sri Lanka
In early 2021, Norfund announced an agreement with the National Development Bank in Sri Lanka, for Norfund to invest new equity for up to 9.9% ownership in the bank. This is the first foreign equity placement agreement for NDB bank, and the investment increased its foreign shareholding percentage to around 21%.
National Development Bank PLC (NDB) is a premier bank with 113 branches and over 150 ATMs and CRMs across the island, serving millions of Sri Lankans through a host of financial services.
In addition to investing equity capital, Norfund will provide technical assistance and global expertise assisting the bank to promote global environmental and social standards, and to achieve best in class corporate governance.
This was Norfund’s first equity investment in Sri Lanka, and the second investment in the country.
By investing in The National Development Bank in Sri Lanka, Norfund aims to contribute to increased access to capital for SMEs and the unbanked in a country hard hit by COVID-19.
First investments for Colombia, Indonesia, Senegal
In line with the 2019 updated strategy, three new countries were invested in during 2021.
- The first investment in Indonesia was Amartha (see above), followed by Bina Artha, a fast-growing microfinance institution. Bina Artha provides its services through an extensive network of almost 346 branches reaching over 382,412 clients in Java and Sulawesi islands and plans to gradually expand to other islands of Indonesia. Norfund committed 43.5 million NOK in 2021.
- In Colombia, a 131.7 million NOK commitment was made to Kandeo, a private debt fund targeting mid-sized companies in Colombia and Peru. The fund will focus on providing USD 4-10m in debt to companies in various economic sectors.
- In Senegal, Norfund committed 131.7 million NOK to Cofina Senegal, a microfinance institution focusing on meso-finance, meaning the missing middle of SMEs that are too large for traditional micro lending, but still too small or informal to source funding from ordinary banks. The loan from Norfund will promote access to financial services for entrepreneurs and MSMEs in Senegal.
Financial Institutions portfolio
|Investment||Country||Investment year||Sector||Instrument||Owner share||Domicile||Committed (MNOK)|
|National Development Bank||Sri Lanka||2021||Banking||Equity||10%||Sri Lanka||141.8|
|Kandeo Fund 3 Debt||Regional||2021||Microfinance||Funds||8%||Canada||132.3|
|Ecobank Transnational Incorporated (ETI)||Regional||2021||Banking||Loans||0%||Togo||132.3|
|Quona Inclusion Fund III||Global||2021||Investment funds||Funds||0%||Cayman Islands||132.3|
|Cofina Senegal SA||Senegal||2021||Microfinance||Loans||0%||Senegal||49.9|
|PT Bina Artha Ventura||Indonesia||2021||Microfinance||Loans||0%||Indonesia||44.3|
|Lula Lend Proprietary Limited||South Africa||2021||Microfinance||Loans||0%||South Africa||39.5|
|First National Bank Ghana||Ghana||2020||Banking||Loans||0%||Ghana||132.3|
|Softlogic Life||Sri Lanka||2020||Other financial services||Loans||0%||Sri Lanka||66.1|
|LOCFUND NEXT L.P.||Regional||2020||Microfinance||Funds||30%||Canada||53.4|
|LOLC (Cambodia) PLC.||Cambodia||2020||Microfinance||Loans||0%||Cambodia||52.9|
|Yoma Bank Limited||Myanmar||2019||Banking||Equity||11%||Myanmar||295.0|
|Mutual Trust Bank Limited||Bangladesh||2019||Banking||Loans Equity||10%||Bangladesh||294.2|
|Accion Quona Inclusion Fund LP||Global||2019||Investment funds||Funds||6%||Cayman Islands||82.9|
|Banco BCT||Costa Rica||2019||Banking||Loans||0%||Costa Rica||80.8|
|Optima Servicios Financieros SA de CV||El Salvador||2019||Microfinance||Equity||36%||El Salvador||53.7|
|Credicomer||El Salvador||2019||Microfinance||Loans||0%||El Salvador||41.2|
|AfricInvest Financial Inclusion Vehicle (FIVE)||Regional||2018||Banking||Equity||21%||Mauritius||276.7|
|Banco Promerica Costa Rica||Costa Rica||2018||Banking||Loans||0%||Costa Rica||220.5|
|NMI Fund IV||Global||2018||Microfinance||Funds||25%||216.0|
|ONE Bank Limited||Bangladesh||2018||Banking||Loans||0%||Bangladesh||49.6|
|NMI GP IV AS||Global||2018||Microfinance||Equity||22%||Norway||24.0|
|Access Bank Plc.||Nigeria||2017||Banking||Loans||0%||Nigeria||49.6|
|Fedecredito||El Salvador||2016||Microfinance||Loans||0%||El Salvador||161.7|
|Banco Promerica Guatemala||Guatemala||2016||Banking||Loans||0%||Guatemala||88.2|
|Banco Promerica El Salvador||El Salvador||2015||Banking||Loans||0%||El Salvador||176.4|
|ARREND Central America||Regional||2015||Other financial services||Loans Equity||22%||Guatemala||82.8|
|Advans MFI Myanmar Company Limited||Myanmar||2015||Microfinance||Loans Equity||40%||Myanmar||55.4|
|Myanmar Finance International Limited||Myanmar||2015||Microfinance||Loans Equity||25%||Myanmar||24.7|
|ACLEDA Bank Lao Ltd.||Laos||2014||Banking||Loans||0%||Laos||13.6|
|NMI Fund III||Global||2013||Microfinance||Funds||26%||241.1|
|Prasac Microfinance Institution Plc.||Cambodia||2013||Microfinance||Loans||0%||Cambodia||202.8|
|First Finance Plc.||Cambodia||2013||Microfinance||Loans Equity||15%||Cambodia||26.1|