Norfund focuses especially on new businesses (greenfield businesses) and small and medium sized enterprises (SMEs) that need venture capital. These types of enterprises are more likely to struggle to secure market financing, but have high development effects.
New businesses are necessary to develop local economies. But starting a new enterprise entails high risk and attracting capital can be challenging, despite their great profitability potentials and positive development effects.
Small and medium-sized enterprises (SMEs)
SMEs are crucial to a well functioning economy. They contribute to local employment, diversification of the economy and economic growth. However, in poor countries, it is particularly difficult for this type of businesses to obtain financining. They are usually too large for microfinance, but too small and lack sufficient collateral to get loans from commercial banks.
For investors, SMEs are challenging because you have to invest in many small businesses with great variation in industry and maturity. This requires detailed local knowledge and presence. Norfund makes direct investments in SMEs, as well as through local and regional funds that knows the market. Experience has shown that selected local funds managers can do this job well, and that they contribute considerably to value creation.