Norwegian Investment Fund for Developing Countries, Norfund has, together with Shuraako, a program of One Earth Future, and the Danish development finance institution, IFU, have established a USD 10 million fund for supporting small and medium sized companies in Somalia.
The Nordic Horn of Africa Opportunities Fund is among the first commercial investment funds for Somalia. The 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 Fund has been set up in line with Norwegian development assistance. It focuses on post-conflict and fragile states by building sustainable societies and creating jobs. The Fund has an initial capital target of USD 10 million.
The primary investment instrument will be the Sharia compliant “Murabaha” and the average deal size will be USD 250 000. The capital will flow to all regions of Somalia.
The investments are made into companies in various sectors including but not limited to fisheries, agriculture, light manufacturing, hospitalities and energy. Norfund is the initiator and anchor investor of the Fund and has committed an investment of up to USD 5 million, whereof the Norwegian Ministry of Foreign Affairs has supported a first loss component of USD 3 million.
Other investors are the Danish development finance institution IFU with a commitment of USD 2 million and the Arsenault Family Foundation with a commitment of USD 2 million. Other partners include the Development Fund, a Norwegian NGO active in Somalia and with a network of Nordic Somali Diaspora.
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 says, “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.”Marcel Arsenault, Founder and Chairman of One Earth Future and the Arsenault Family Foundation says; “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.”
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