Ondernemende ontwikkelingssamenwerking

Recently, more Dutch charitable foundations have started preparations for the issuance of bonds. FMO supports the bond issue of NOTS by providing EUR 12m subordinated capital, of which EUR 7m on its own account and EUR 5m from the MASSIF fund which FMO manages on behalf of the Dutch Ministry of Foreign Affairs (Development Cooperation). The FMO investment enables NOTS to collect EUR 28m from private investors of which the ministry of Development Cooperation contributed EUR 7m. The total amount of EUR 40m will be invested in Tier 3 microfinance institutions in developing countries.

Bart Hartman, director of NOTS, said this bond issue illustrates a new trend. Traditionally charitable organizations finance their activities with government subsidies and donations from citizens and companies. It is fairly new for foundations to loan money from the public by means of bond issues and is a good way of financing activities that generate sufficient revenues to cover the costs including financing costs. Microfinance is a well-known example of such an activity, others include the production and sale of photovoltaic or LED lighting in developing countries.   

The reason that more and more charitable organizations will follow suit, is in the first place that the amount globally available in investment funds is much larger than the amount of subsidies and donations. Second, investors are far more critical than donors, which will positively affect the efficiency of the charitable foundations’ activities. Nevertheless, it is not easy for charitable foundations to attract investors’ capital because the risks that come with the activities of charitable foundations are still hard to predict. To stimulate the capital flow towards these foundations, the government or a public-private organization such as FMO needs to help the matter along by taking a part of the risk for its own account. This type of development cooperation is very important for the Ministry of Foreign Affairs because it catalyzes private funds for development goals with public development money committing new parties to development cooperation at the same time.

About FMO
The Netherlands Development Finance Company (FMO) is the international development bank of the Netherlands. FMO invests risk capital in companies and financial institutions in developing countries. With an investment portfolio of € 4.6 billion, FMO is one of the largest bilateral private sector development banks worldwide. Thanks in part to its relationship with the Dutch government, FMO is able to take risks which commercial financiers are not - or not yet - prepared to take. FMO's mission: to create flourishing enterprises, which can serve as engines of sustainable growth in their countries.