In 1995, the North-South/Development Aid Commission argued that Norway ought to establish an investment fund as a key instrument of its development policy. For some years, NORAD had provided loans to Norwegian enterprises that established themselves abroad, but was restricted by its mandate from providing equity to companies. At that time Norway was one of very few Western European countries that did not have a development finance institution (DFI). The proposal to establish Norfund was submitted to the Storting as a separate matter in Proposition No. 13 to the Odelsting chamber (1996-1997), and the Norfund Act was approved on 9 May 1997 (No. 26).
The Norwegian Investment Fund for Developing Countries (Norfund) was established by the Storting in 1997, with the objective of alleviating poverty by investing in and providing loans to profitable and sustainable companies, thereby contributing to economic development and growth in private enterprise. It was to operate in countries with limited access to commercial finance owing to the reluctance of ordinary commercial entities to invest because of high risk.
Since its establishment, Norfund’s annual capital contribution has increased from NOK 175 million in 1998 to NOK 1030 million in 2012. Capital is allocated to Norfund by the Norwegian Government through the Ministry of Foreign Affairs.