In the world of development finance, FMO stands out for being firmly entrenched within the private sector. The mission of the Dutch entrepreneurial development bank, as it is known, is to foster small businesses in emerging markets and, in turn, connect them with commercial finance and investors. 

FMO’s activities are dedicated to three sectors: agribusiness, food and water; energy; and finance, and at year-end 2022 its investment portfolio consisted of €13bn worth of committed capital. Michael Jongeneel, its CEO and the former global head of management consultant Bain’s sustainable finance practice, spoke with fDi about the benefits of specialisation, its biggest success stories and why multilaterals must focus on more than just funding in supporting growing businesses.

Q: Why is FMO dedicated to three sectors?

A: I am convinced that if you focus, you can achieve more and have more knowledge than if you are very dispersed.

As for why these three sectors, it’s based on where we can have the most impact. Access to food, energy and finance are central to a decent life. But projects also need to be financeable in the private sector. So for instance, you can have a significant impact with education, but it is very difficult to finance via a private sector lens. 

Q: FMO’s strategy is to support early stage businesses to the point private investors can step in. What are some of its biggest success stories?

A: One example is Paymob, an electronic payments fintech in Egypt that supports small entrepreneurs who might not have access to bank accounts. We started supporting them in 2020 with $1.4m for organisational development. In 2022 they raised $50m in a public funding round with a number of commercial investors.

Another example is Nigeria's Access Bank. When we started working with them, they were outside the country’s top 50 banks. Now, they are among the top three.

At this point, we get the question: ‘What is our role?’ But we work with them on further developing their environmental, social and governance strategy. They’ve become a local role model and are expanding and bringing their standards to more countries in Africa, including fragile states.

Q: How do FMO’s renewables projects, like its investment in SolarX in the Sahel, support entrepreneurs?

A: Electricity power outages are a huge issue in emerging markets across the globe, but especially in Africa. South Africa currently stands out, but so does the Sahel region. In these areas, access to reliable power is very important to running a stable business.

Q: The Nasira programme, rolled out in Palestine in early 2022, sees FMO guarantee a portion of local loans offered to entrepreneurs without access to formal finance. What has the reception been like?

A: This programme is focused on youth-, refugee- and women-led businesses, and we are very happy to have found a first customer in Palestine: microfinance institution, Vitas. Through them, the programme has really taken off. To-date, 504 entrepreneurs have been provided a loan under the guarantee programme, with an average value of almost $7500. A second microfinance institution in Palestine, Faten, has just signed-up to join the programme.

Q: What is the best way to incentivise more private investment towards the UN sustainable development goals?

A: The key thing is blended finance. That has many different forms, but it can mean, for example, the first-loss tranche being taken by a development finance institution, government or another institution providing patient capital. But once you get the capital inflow, the bigger issue can be that there are not enough projects. That’s why we added market creation to our renewed strategy in September 2022. We need to stimulate the growth of nascent initiatives so they are ready when the money gets there. 

This interview has been edited for brevity and clarity.