Guatemala faces one of the highest poverty and inequality rates in the region, with a 55 % poverty rate. As Guatemala strives for economic stability and social progress, access to finance is needed to grow businesses that create jobs.

“Apart from the financial strength of the entity, what most moved me about Genesis was the development journey it seeks for each of its clients, most of which are from the base of the income pyramid. It begins with examining how well they and their family are in terms of basic needs before moving them towards loans for their micro businesses or offers a mix of funding to achieve both sets of objectives,” says Heidi Achong, Investment Director in Norfund.

The current client base of Génesis is more than 340,000 people, of whom 72% are women and 76% reside in rural areas.

“I was impressed to see how prepared their sales force is to assess their clients’ needs, in rural areas. Even integrating sales staff and financial education programs in indigenous languages. In Guatemala there are greater than 23 of these languages,” says Heidi Achong.

Génesis provides financial access, but also tailored guidance and training, empowering entrepreneurs to improve their businesses and enhance the quality of life for their families.

Together with the Dutch development finance institution FMO, Norfund and other investors are investing a total of 85 million USD in Génesis. The aim is to unlock the full potential of Guatemala’s microentrepreneurs, paving the way for inclusive growth and prosperity.

Last year’s investments over Norfund’s Climate Investment Fund will help avoid greenhouse gas emissions equivalent to more than a sixth of Norway’s annual emissions, with annual financial returns so far above 20 %.

The Climate Investment Fund was established in 2022 to maximize avoided emissions through investments in renewable energy in emerging economies.

“This shows that the Climate Investment Fund is a very effective tool to accelerate the global energy transition. This type of contribution is crucial to mitigating the climate crisis. We are reminded daily that the crisis is hitting the world’s poorest hardest, and we have no time to lose in the fight against climate change,” says Minister of Development Anne Beathe Tvinnereim.

New figures from Norfund shows that the return from the Climate Investment Fund since its inception has been as much as 24.4 % (IRR) in investment currency, or 20.4 % in NOK. Over 25 years, Norfund’s investments in renewable energy have had an average annual return of 6 % in investment currency, and 9.8 % in Norwegian kroner. In comparison, NBIM reports an annual return of 6.1 % in the same period.

“Although these are figures from a very short period, it is an indication that it is possible to deliver better returns from the Climate Investment Fund than the already strong figures we have seen over time from Norfund’s energy investments,” says Thorleifsson.

Norfund’s Climate Investment Fund is also a key to mobilising private capital for developing countries. It was the main reason why Norway reached the target set at the climate summit in Glasgow in 2021 of doubling climate financing as early as 2022 – while the target was set for 2026.

Access to affordable capital pays big dividends in avoided emissions

Although the IEA expects strong growth in renewable energy in the coming years, it will not be enough to meet climate targets. The key challenge is the need to rapidly scale up renewable energy financing in developing countries and emerging economies, which have a huge need for more power generation in order to grow out of poverty. In the next 20 years, India alone will build as much as the entire EU has built today.

For all renewable energy, the cost comes as an upfront investment, while operation is almost free. Expensive capital as a result of higher perceived risk in emerging economies means that it can often still be profitable in the short term to choose coal and other fossil solutions, even though these have high and variable operating costs. The capital cost of large-scale solar energy, for example, is well over twice as high in emerging economies as in high-income countries, according to the IEA.

“Whether the world achieves its climate goals will largely depend on the extent to which these markets receive sufficient and affordable capital to tip the scales in favour of growth based on renewable energy,” says Thorleifsson.

Coal-based power generation in emerging economies accounted for more than 65% of the global increase in emissions in 2023.

AwanTunai is a Jakarta based FinTech-company that offers solutions to increase access to capital for micro, small and medium sized enterprises in the supply chain of fast-moving consumer goods (FCMG). Norfund is investing up to 9.2 million USD in the company to help create more jobs in Indonesia. 

The Consumer Goods Industry in Indonesia is fragmented with a large number of SMEs and small retailers scattered throughout the country. Access to credit is low, and many SMEs do not have access to formal financing. Consumer goods, such as food or household products sold to consumers, remain manual with a limited share of sales done online.

“We have been impressed with how AwanTunai has been able to use FinTech to reach out to segments of the SME sector that are underserved or unbanked in Indonesia, and we are looking forward to support the company’s ambition to reach out to even more companies, allowing them to grow and create more jobs”, says Fay Chetnakarnkul, Regional Director for Asia in Norfund.

Ambitious founders

The founders Rama Notowidigo and Dino Setiawan started the company in 2017 with a mission to optimize the traditional and mainly manual consumer goods supply chain with technology and access to finance, in order to advance and develop communities in Indonesia. They did so after visiting areas where especially access to working capital was very limited and often only available from local loan sharks with extremely high interest rates.

“We’re proud at AwanTunai to be able to develop patented in-house machine learning innovations that has enabled us to successfully manage unsecured SME lending risk. The usual requirement for hard collateral to manage risk in SME lending has been a long running barrier to financial inclusion. We hope the unsecured SME lending innovation we’re scaling in Indonesia will eventually be deployed across other developing economies.” Says Dino Setiawan, co-founder and CEO of AwanTunai.

Several FinTech investments, but first time as equity

Norfund has previously given loans to FinTech companies such as Wave Mobile Money, operating in Senegal and the Ivory Coast, and Lula Lend, a tech-driven financial institution providing loans to small and medium-sized enterprises in South Africa.

The investment in AwanTunai is however the first equity investment in the FinTech sector. The investment will enable AwanTunai to scale up its operations and reach more unbanked and underserved companies. Other lead investors in this round include MUFG Innovation Partners (MUIP) and Finnfund.

“We look forward to supporting AwanTunai’s vision of creating a more inclusive and digital economy in Indonesia”, says Chetnakarnkul.

Norfund invested just over 6.5 billion NOK in developing countries in 2023. This is as much as the record year 2022, despite the fall in the world’s total investments.

Total foreign direct investment to developing countries fell last year by 9% to $841 billion, with a drop of 12% in developing countries in Asia and 1% in Africa, according to a report by UNCTAD.

Norfund’s investments have seen steady growth in recent years, despite demanding times characterized by, among other things, the pandemic. In 2020, investments increased by 20%, in 2021 by 10% and in 2022 by another 20%. In 2023, the record level of 6.5 billion from the year was thus maintained. Norfund’s total committed portfolio was 36.2 billion at the end of the year.

Invests 2.5 times the amount transferred from the state

Over the past two years, Norfund has received 1.68 billion for the fund’s development mandate and one billion for the Climate Investment Fund over the aid budget. The total annual investments are now 2.5 times the amount transferred from the state budget, as a result of freed up funds from returns and sales.

– By investing instead of giving the money away, we mobilize private capital and use the same funds several times, so we can help fight more poverty and climate change, says Thorleifsson.

Norfund was given responsibility for the new Climate Investment Fund aimed at avoiding emissions in developing countries in 2022. In 2023, Norfund invested 1.6 billion over this mandate in renewable energy in countries with a particularly high proportion of fossil energy in existing and planned power production.

– The need for capital for renewable energy in these markets has grown further as a result of more expensive capital and high gas prices, and we see great opportunities to make a significant difference, says Thorleifsson.

Over half of the investments goes to Africa

Above the development mandate, Norfund invested a further 1.4 billion in renewable energy. Norfund invested 2.3 billion in companies within financial inclusion, 812 million in companies within agriculture and industry, and 412 million in local and regional funds that invest directly in companies.

51% of Norfund’s investments over both mandates in 2023 went to Africa, 34% to Asia and 16% to Latin America. Of Norfund’s total committed portfolio, 62% was in Africa at the turn of the year.

– Through investments that provide access to energy and capital, as well as direct ownership in companies, we see that we can contribute to fighting poverty in an efficient, sustainable and scalable way, says Thorleifsson.

Norfund, alongside IFC and other DFIs, has committed $15 million to the frontier investor XSML Capital and their new fund – African Rivers Fund IV (ARF IV), bringing total commitments so far to almost $100 million. The investment will address the scarcity of capital towards the SME segment in frontier markets in Africa.

XSML Capital manages several private equity funds in Central and Eastern Africa and provides scarce risk capital to small and medium sized companies that operate in frontier markets such as DRC, Uganda and Angola. XSML is now raising its fourth fund, which allows them to double their investments and expand into new markets such as Zambia.

XSML specializes in helping talented African entrepreneurs in growing their business into sustainable medium and large companies. They have a track record of scaling up over 75 SMEs and initiating more than 150 business improvement projects, with investments ranging from US$ 300k to US$ 10m.

SMEs, making up 90% of African businesses that contributes significantly to GDP and job creation, often lack access to capital needed for developing their business.

The investment is aligned with Norfund’s strategy of bridging the financial gap that hampers the growth of these businesses.

Norfund invests together with Swedfund, British International Investment (BII), Dutch Entrepreneurial Development Bank (FMO), SIFEM and the International Finance Corporation (IFC).

Norfund is selling its shares in two solar plants in Africa. The combined capacity is 48.5 MW.

“This sale releases capital that we will re-invest where it can create the most impact in terms of fighting poverty and avoiding emissions.” Said Mark Davis, EVP for Renewable Energy in Norfund.  

The solar plant in Rwanda, the country’s biggest, was officially opened by then prime minister of Norway Erna Solberg in the summer of 2015. It was the first bigger commercial solar plant in East Africa, an important contribution in a country where diesel played a central part of the energy mix for the 15 percent of the population with access to electricity at the time.  

The plant in Mozambique was the first large solar power plant in the country when it opened in 2016. As in Rwanda, the Norwegian actors KLP, Scatec and Norfund collaborated. With the production of approximately 75GWh a year the facility generates electricity equal to the demand of 170.000 households annually.  

The solar plant in Rwanda is being sold to the American company Fortis Green Fund I, Rwanda Holdings Ltd, and Axian Energy Green Ltd. The solar plant in Mozambique is being sold to Globeleq, a company owned by Norfund (30%) and British International Investment (70%). Scatec recently sold its shares in both plants as well.  

Norfund is partnering with Westgass and IPS in investing in fertilizers based on green hydrogen in Uganda. Strong industrial partners have set joint targets for the annual production of 200 000 tons of locally produced fertilizer, which will provide increased income and food security, without the greenhouse gas emissions usually entailed in such production.  

In a pioneering effort, Industrial Promotion Services (IPS), the industrial and infrastructure development arm of the Aga Khan Fund for Economic Development, and Westgass Internasjonal, a Norwegian green energy company focused on accelerating the transition from fossil fuels through green hydrogen, have signed a joint development agreement (JDA) with the Government of Uganda, to develop a green hydrogen based fertilizer production facility, leveraging on the country’s abundant renewable energy resources. Norfund, the Norwegian Investment Fund for developing countries, is co-financing the project through a convertible loan, and the project has received grant funding from Norad, the Norwegian Agency for Development Cooperation. 

The project aims to produce 200 000 tons of fertilizer every year. Through an agreement on the supply of 100 MW of renewable energy from a local hydropower plant, the partners will produce green hydrogen through electrolysis. The green hydrogen is then combined with nitrogen (produced by an air separation unit) to produce green ammonia. This is further processed with dolomite or phosphates to produce calcium ammonium nitrate (CAN) and fertilizers based on nitrogen, phosphorus, and potassium (NPK), which are types of fertilizers already in use in the region.  

A green pioneer project 

The fertilizer that is currently used in Uganda and throughout the region is mainly imported. Natural gas-based production of mineral fertilizers is dominant in the world today and is a major source of GHG emissions. High import prices combined with lack of stable access to local fertilizer makes it hard to develop the local agriculture in the region.  

“By establishing local production of sustainable fertilizer, Uganda will be able to become a pioneering country when it comes to adopting green technology, which will ensure economic growth and stimulate local food production while avoiding over 200 000 tons of CO2 per year,” says Kinar Kent, CEO of Westgass.  

Access to fertilizer at a reasonable price increases income and food security 

Norad has supported the project through a grant. Norfund is initially investing in the project through a convertible loan under the Frontier Facility, aimed at early-phase investments, but aims to invest further as the project develops. Norfund’s goals is to create jobs and improve lives by investing in sustainable businesses. This project will create 300 direct jobs, but have much larger ripple effects.  

Uganda’s consumption of fertilizer is between 0,23 and 1,5 kg/hectare, far below the average of 8 kg/hectare in sub-Saharan Africa, and only around 24 percent of agricultural households in the country use mineral fertilizers, according to the FAO. Imported fertilizer is expensive, which makes it more difficult to increase its use, and the price has increased further because of increased gas prices following Russia’s invasion of Ukraine.  

“A local production facility for mineral fertilizer will reduce costs and provide greater opportunities to use fertilizer to increase yields, while at the same time reducing the environmental impact,” says Kent.  

Solid partners combine industrial expertise and local experience 

Norwegian Westgass Internasjonal is the international project development arm of Westgass Hydrogen, a green energy company that focuses on accelerating the transition from fossil fuels in Europe and emerging markets. IPS is the industry and infrastructure development arm of the Aga Khan Fund for Economic Development and has 60 years of experience with industry and infrastructure in Africa.  

Uganda is classified by the OECD as a “Least Developed Country” (LDC).  

“This is a pioneering project in an early phase, and carrying out such a project is a huge boost in a country like Uganda. However, with such strong partners who combine industrial expertise with local experience, we believe this project will create great opportunities that eventually can be scaled up further,” says Thorleifsson. 

Foto: Ken Opprann

Norfund is investing in the world’s first climate-focused guarantee company. It aims to unlock billions in climate finance for developing countries by providing guarantees for institutional investors buying green bonds issued and listed on the London Stock Exchange (LSE) and green loans issued in the private credit market. 

The Green Guarantee Company (GGC), developed by the Development Guarantee Group, which was co-founded with Cardano Development, celebrated the launch of its operations with a Market Closing Ceremony at the LSE this past Friday. GGC will use guarantees to help borrowers in developing countries improve their credit ratings to access global capital markets like the LSE. 

In addition to Norfund, the company is receiving capital from the United Kingdom’s Foreign Commonwealth & Development Office (FCDO) through its MOBILIST programme, the Green Climate Fund, the Nigeria Sovereign Investment Authority (NSIA), and the United States Agency for International Development (USAID) with Prosper Africa. Norfund’s investment is USD 5 million.  

“The enormous need to scale up climate financing in developing countries makes it crucial that we use public funds in a way that mobilises more private capital. Norfund is our most important tool for contributing to this, and I am pleased that they are helping to develop new innovative solutions,” says Anne Beathe Tvinnereim, Minister for International Development.  

GGC will leverage an initial $100 million from these investors to provide up to $1 billion of guarantees underpinned by an investment grade rating of BBB/Stable from Fitch Ratings. Initially, it will focus on private credit and the LSE green bond market but plans to expand to other major exchanges. It will seek to raise additional capital from the private sector as it scales its operations, targeting a guarantee capacity of $5 billion or more by 2035.  

GGC’s cover will prioritize green infrastructure, renewable resources, alternative energy, and clean transportation. Guarantees will be prioritized for issuers from countries eligible for official development assistance in Africa, Asia and Latin America, including India, Indonesia, Brazil, Bangladesh, Philippines, Egypt, Vietnam, and Kenya. 

Guarantees are pivotal to enable developing countries to access long-term hard currency debt financing to combat climate change. By helping to improve the credit ratings of assets to above investment grade, guarantees enable borrowers in developing countries to access a far bigger pool of capital at a lower cost. 

GGC also plans to support borrowers in delivering a high standard of reporting on the climate impact of the green bonds and loans it guarantees. The company will work with issuers to build their capacity to deliver quality and consistent reporting to help make green bonds and loans from developing countries an attractive asset class deserving of larger allocations in global climate debt portfolios. 

The biggest combined solar and battery power plant in Africa, developed by the Norwegian company Scatec, has started delivering electricity in South Africa. The Norfund-managed Climate Investment Fund has invested more than 400 million NOK in the project, that both avoids emissions and shows how battery storage can increase the importance of solar energy on the African continent.  

Norfund has together with British International Investment invested in the project through the South African company H1 Capital, which is qualified as an “Black Economic Empowerment” investor in South Africa. H1 Capital owns 49 percent of the project.  

Combining solar energy and battery storage 

The Kenhardt facilities are amongst the largest hybrid solar and battery storage facilities in the world. With 540 MW solar energy and 225 MW /1140MWh battery storage, the facility will serve the national power grid from 5am to 9:30pm.  

Great need for risk capital  

South Africa is currently facing an acute energy crisis and experience frequent power outages. During COP28 in Dubai they called for increased climate financing to secure a stable energy supply and to reach the commitments to step up the transition to renewable energy.  

South Africa is the 14^th most emitting country of greenhouse gasses in the world. The ranking is mainly a result of the big dependence on coal, which covers nearly 90 percent of the country’s energy consumption. The Cape Town based think tank Meridian has estimated that South Africa needs investments in renewable energy of more than 25 billion USD over the next ten years to reach its climate goals.  

The Kenhardt project will annually contribute with avoiding 870 000 tons Co2, which is about the same as 430 000 Norwegian fossil cars.  

The Norfund managed Climate Investment Fund is investing 10 million USD in South East Asia Clean Energy Fund II, known as “SEACEF II”. The investment will contribute to providing scale-up capital to early-stage companies focused on advancing the low-carbon transition in Indonesia, Vietnam and The Philippines.  

IEAs latest report shows that Southeast Asia barely exceeds the Middle East and Africa in expected renewable energy capacity growth over the next years and that lack of financing for emerging and developing economies is the key issue. The SEACEF II fund will invest in promising renewable energy generation, energy efficiency, electric mobility, and electrical grid businesses at their early-stage, high-risk development phases.  

“This investment is the first we are undertaking under our climate investment mandate in the Philippines, Vietnam and Indonesia. These are countries where both the need for investments in solutions that will avoid emissions and the potential for positive impact are large. We are looking forward to making further investments in these countries in the future,”

Felix Barwinek, Senior Investment Manager, Renewable Energy at Norfund

Clime Capital Management is a Singapore-based fund manager with good results from a similar fund. In addition to Norfund, the British, Swedish and Dutch development finance institutions are amongst the investors, as well as the Cisco Foundation, DFAT, ACP, IFC and Global Energy Alliance for People and Planet (GEAPP).  

“To enable development and scale-up of local companies with local solutions central for the energy transition is important to us, and in line with our mandate. The prospects for further mobilizing private capital are also present.” Said Barwinek. 

SEACEF II draws on the flexible risk capital and investment-making discipline that underlies Clime Capital’s successful inaugural fund, SEACEF I. Launched in 2020, SEACEF I has made twelve investments. Its investments made through 2022 have raised more than 27 times the capital provided by SEACEF I – considerably more than that achieved by governments and private-sector funds. 

“By crowding in capital to de-risk early-stage businesses and development projects, we have demonstrated that small amounts can be leveraged to produce significant impacts. Now is the time to double down on this approach to maximize the results each investment dollar can achieve. We believe our model is the way to achieve this,”

Joshua Kramer, Chief Investment Officer and co-founder of Clime Capital