Our business model
Since 1970, FMO has made a positive difference in emerging economies by empowering entrepreneurs to build a better world. We create long-term value by investing in the private sector and at the same time support direct and indirect jobs, decrease inequality or have a mitigating impact on climate change.
Our business model is visualised in the below diagram, which combines elements from the International Integrated Reporting Council (IIRC) reporting framework and the elements that are most relevant to us.
Our key inputs - Our solid track record as a development bank demonstrates our cutting-edge knowledge of ESG and commercial finance in developing countries. These qualities are further strengthened by employees who feel a strong drive to fulfil our mission and a willingness to take risks, balanced by our risk awareness.
Our partnerships include networks of clients, knowledge partners and financial partners such as multilateral and development finance institutions, commercial investors, banks, and governments. By connecting their networks and resources to our own, and by inspiring them to take action, we can greatly increase the impact we all have on the world around us. Considering how urgent and complex climate change and inequality are, we need this alignment if we are going to turn things around.
FMO has a AAA credit rating, which allows us to attract funding for long-term development at affordable rates. Our AAA rating is strategically important for FMO and follows from the Dutch State guarantee.
Why - We believe in a world in which, in 2050, more than 9 billion people live well and within the means of the planet’s resources. Our mission is to empower entrepreneurs to build a better world. Our goal is to be the preferred partner for our stakeholders to invest in local prosperity.
How - All our investments are guided by the following principles:
Additionality: providing financial products and services which commercial banks or other investors do not provide, or do not provide on an adequate scale or on reasonable terms. FMO can also be additional through sharing ESG expertise that other parties do not possess. In 2018 100% of our investments were either financially or ESG additional and 43% were both financially additional and ESG additional;
Catalysing: maximising the flow of finance to FMO’s target sectors and groups. This requires FMO to maximise the growth in and utilisation of its equity and the leverage provided by its financing activities;
Good governance: adherence to the principles of good governance in the widest sense. FMO sets the standard in several areas of its operations, including social and environmental policy.
Our actions are guided by four shared values and the behaviours through which they are expressed. During 2018 we started a process to determine these values and behaviours and performance on these values will be part of the periodic appraisals and performance management cycle. FMO’s Code of Conduct plays an important role when onboarding new colleagues. Key elements in this code (integrity, transparency, respect and professionalism) are reflected in policies and procedures and monitored by management. Concerns regarding any of these elements can be raised via our Speak Up Policy.
Besides organisational and operational controls we feel that behaviour and culture have a significant impact on our integrity. In recent years we have encouraged staff at all levels of the organisation to lead by example and provide open feedback. In the years ahead we will continue to strengthen our culture in this area, something that is regularly discussed with FMO’s Supervisory Board.
What - We offer long-term financing through loans, private equity, guarantees and trade finance. Where appropriate we provide our funding in local currencies. Thanks to our experience and track record, we can offer other public and commercial partners the chance to invest comfortably with us, allowing us to mobilize more funding for our clients and achieve greater impact. Our role extends beyond that of a financier. We actively promote best practice in ESG, and support knowledge exchange and technical expertise and bring key players and regulators together to create sector level playing fields.
Our outputs – Through the financing and services we provide we create long-term value for our stakeholders. Our investments support local economic growth and jobs, reduce inequality, and fight climate change in countries that are most vulnerable to it. We enable local and Dutch entrepreneurs to grow their businesses through our financing. We provide opportunities for investors to invest for impact and return. Our value creation goes beyond financing, however. We empower entrepreneurs to develop sustainable business models by means of trainings, peer-to-peer learning, and sector-wide initiatives through our capacity development programme. By doing so they are better equipped to make a positive contribution to the global challenges we are all facing, but we also firmly believe that our clients will perform better because of this, in turn making our investments better and reducing risk. Healthy returns enable us to further increase our ability to invest for impact.