Finland to invest EUR 16 million in small businesses in developing countries through Finn Church Aid
There is a desperate shortage of decent jobs in developing countries. Finn Church Aid's (FCA) investment company responds to this need by introducing a new tool to Finland’s development policy.
Finland will invest EUR 16 million in small businesses that create jobs through FCA Investments Ltd, a new company established by FCA. The investment is made in a form of a loan and, according to the terms and conditions of the loan, assets will be paid back with interest to the State of Finland in 18 years with profits from investment activities.
At the initial stage, FCA Investments Ltd will invest in business activities in Asia and Africa through two funds. The company will also start to make direct investments.
“The lack of moderately priced financing in developing countries is a key obstacle to setting up businesses that create jobs. The new company can support promising businesses' growth potential in cases where their activities are still too small-scale to interest traditional development finance companies,” says Minister for Foreign Trade and Development Anne-Mari Virolainen.
FCA Investments is planning to make direct investments of EUR 0.1 –1 million. Traditional development finance companies seldom make investments that are under one million euros because the administrative costs of small investments become too high in relation to the investment made.
Making small investments is worthwhile for FCA because at the initial stage it will use also other resources to support the financing of businesses. It can support them, for example, in matters related to the management of finances, business planning and marketing.
Compared to other similar actors, FCA Investments benefits from the fact that Finn Church Aid has staff on location and they have experience from countries in which investments will be made," says Executive Director Jouni Hemberg from FCA.
FCA Investments is planning to make its first direct investments in Uganda in Eastern Africa. In addition to Uganda, FCA will probably make direct investments also in Somalia, Kenya, Jordan, Nepal, Myanmar and Cambodia. In some of these countries the operating environment is clearly more challenging than in Uganda.
“Work and sufficient income are the only way to achieve sustainable peace. By providing loans for vocational training and small businesses we can lift people out of poverty. We believe that the private sector will play a key role in providing support also to the poorest countries," says Hemberg.
Fact: a loan with interest to Finn Church Aid
- The loan to be granted to FCA is a so-called development policy investment. Previously, development policy investments have been made in the Inter-American Development Bank (IDB) (EUR 9.2 million), Finnfund (EUR 130 million) and the Finland–IFC Climate Change Program (EUR 114 million).
- The interest for the loan is 0.5 per cent, and FCA will start to pay the interest in 2019. The loan period will be 18 years and the loan capital will be repaid in four instalments.
- More information about development policy investments on the website of the Ministry for Foreign Affairs at: https://um.fi/kehityspoliittiset-finanssisijoitukset
Max von Bonsdorff, Director of Unit for Development Finance and Private Sector Cooperation, tel. +358 50 344 1014
Juha Kirstilä, Special Adviser to Minister Virolainen, tel. +358 40 552 8200
Jouni Hemberg, Executive Director of Finn Church Aid, tel. +358 50 325 9579
The Foreign Ministry’s email addresses are in the format email@example.com.