Letter from the MB of the Fund Manager

Staying the Course

In 2023, the volatile global economic and geo-political circumstances were aggravated by more extreme weather conditions, food crises, the collapse of several major banks, the ongoing war in Ukraine, the war in Gaza, and Sahel coups. All with direct and prolonged devastating effects on the well-being of entire communities, in particular in FMO’s geographies. This instability is often worsened by adverse financial factors in many emerging markets such as higher interest rates, high inflations, and increased sovereign debt. The global economy is still growing, but growth is uneven. Over the past 3 years, poverty rates in poor countries have increased. Of the SDGs, only 15% is on track, 48% is moderately on track, and 37% has stagnated or is reversing.

Within this context, our 50+ year mission becomes more relevant by the day: enabling entrepreneurs to increase inclusive and sustainable prosperity. Over the next decade, the World Bank estimates one billion young people — a majority living in emerging markets — will try to enter the job market. If they won’t be able to find decent jobs, this will leave millions without hope for a sustainable future. Our investments supported jobs in local markets – 990,000 direct and indirect jobs in 2023 – and enhanced access to energy, food and finance, crucial factors in breaking the downward cycle of poverty and migration.

Maximizing our impact towards the SDGs is the foundation of FMO’s strategy towards 2030. This past year marks the first full year dedicated to implementing and working towards these 2030 goals. Staying on course, we had similar priorities as in 2022: growing impactful business, ensuring FMO’s foundations are solid, and organizational development.

In 2023, the initial resources of the Land Use Facility (“LUF”), as funded by the Ministry of Foreign Affairs, have been fully deployed with the signing of five new transactions. In March, a USD 5 mln transaction with Taprobane was signed. Taprobane is a leading seafood company in Sri Lanka. The transaction will help the company to rehabilitate abandoned shrimp farms, establish new hatcheries and set up eco-friendly processing factories, which together provides a necessary boost to the local economy, supports the wider agri-value chain and aids both climate adaptation and food system stability. In September, we signed a USD 10 mln transaction with NMB bank in Nepal. With the loan and technical assistance provided by SNV, NMB will be able to grow its MSME and green portfolio. An additional three high impact transactions were signed during the last months of the year, with Trans-Oil Group (USD 7.5 million for grain origination from Ukraine to Moldava, increasing climate resilience throughout the value chain), Sistema Bio (providing smallholder farmers in rural areas in Africa with biogas) and Dvara (providing access to financial services to the lowest segment in climate vulnerable areas in India).

In 2024, with the negotiations in the final stage, we aim for the Land Use Facility to be increased via a loan from FMO, covered by a guarantee from the European Commission under the EFSD+ Program. The pipeline of the LUF is ready for this and with all enthusiasm and passion we will continue to make a difference with the deployment of the LUF in 2024.

Looking ahead

Staying the course, in 2024 we will remain focused on the three core priority SDGs: Decent work and Economic Growth (SDG 8), Reduced Inequalities (SDG 10) and Climate Action (SDG 13), continuing the work towards our 2030 goals. With regard to growing impactful business, we aim to further increase new investments in Green and Reducing Inequalities. We will take the next steps in market creation, supporting the new generation of entrepreneurs. FMO’s Public Funds and facilities will be fundamental to reach these goals.

With the fragile global economic and political situation in some of our markets, we do realize our financial result can be volatile and further growth to maximize our impact will be challenging. But given the immense climate challenge that lies ahead and the huge investments that are needed to support job creation and overall economic development in emerging markets, we see it as our role to be countercyclical and focus on the long term. We invest when others shy away, always with our mission in mind: enabling entrepreneurs to increase inclusive and sustainable prosperity.

The Hague, 28 March 2024

On behalf of the Management Board

Fatoumata Bouaré, Chief Finance & Operations Officer
Franca Vossen, Chief Risk Officer
Huib-Jan de Ruijter, Co-Chief Investment Officer
Michael Jongeneel, Chief Executive Officer
Peter Maila, Co-Chief Investment Officer