Mobilizing funds

Mobilizing funds for our markets is one of FMO's key strategic goals. Our reputation and experience in higher-risk countries and markets often gives other financial institutions and commercial banks the comfort to come on board. In this way, we mobilize more funding, leading investments and catalyzing commercial and institutional investors to frontier markets.

In 2011, we placed more focus on finding opportunities to catalyze funds in which FMO was either joint or sole mandated lead arranger (MLA) in transactions of US $50 million or larger. By the end of the year, we had mobilized a total of US $823 million through syndicated loans, parallel loans and/or risk-sharing agreements, and closed five large transactions as joint or sole MLA of at least US $50 million.

Our efforts to mobilize third-party funds were not helped by the economic crisis, which prompted many Western commercial banks to retreat from emerging markets into their home markets. This was compensated to an extent, however, by other institutional investors and non-European and regional banks. This 'south-south' trend could grow as banks in countries such as Brazil grow bigger and more active both in and outside their own countries.

Even though many professional commercial investors have lost interest in bank debt and equity as an asset class to invest in, there is a growing interest in impact investing in the capital markets. Sustainability is increasingly recognized as an integral part of business, both by our clients and by potential investors.

2012

For 2012, catalyzing third-party funds remains high on our agenda, and we aim to mobilize an ever higher amount. We will focus on taking lead management roles in transactions in our focus sectors, thereby mobilizing funds from both commercial investors and other development finance institutions. We expect catalyzing commercial funds to take place mainly in more developed emerging markets. At the same time, our partnerships with other international DFIs will enable us to catalyze money in countries where it is difficult for commercial investors to operate.

Some emerging market banks are now taking lead roles in world rankings, creating good liquidity in some markets. In Asia and Latin America in particular, liquidity is strong and competition among banks fierce. Meanwhile, a second tier of strong emerging countries is arising like - South Africa, Turkey, Indonesia, Vietnam and Mexico. The financing needs of emerging markets might increasingly be met by regional offerings, which suggests good opportunities to catalyze funds regionally.

As well as catalyzing money through debt products, we plan to work further on fund management initiatives begun in 2011. We will continue discussions about setting up an African fund-of-funds with a group of Kenyan pension funds as anchor investors.