Capital 4 Development Partners, a Dutch fund manager, announced today the first closing of the USD 30 million Capital 4 Development Asia Fund (C4D Asia Fund). The Fund invests in innovative growth stage SMEs in India, Indonesia and the Philippines which aim to bring positive social, environmental and economic change in the lives of marginalized communities and targets a final closing at USD 50 million by end of 2019. The Fund will contribute to inclusive local economies by supporting SME companies that address and solve for local challenges and / or industry inefficiencies. Based upon a strong belief in the advancing effects of diversity, the Fund integrates a gender lens in its investment strategy and aims to invest at least 30 percent of its capital in SMEs owned or led by women. A variety of financing instruments, including private equity and mezzanine financing, will be used. The Fund benefits from a launching portfolio of 21 investments as well as an Investee Support Facility.
ICCO Cooperation, a leading Dutch NGO, is the sponsor investor of the Fund, providing de-risking features, such as a USD 10 million first loss facility and a preferred return rate for other investors. Besides ICCO, the first closing investors are the Dutch Good Growth Fund, FCA Investments and Investing in Women, an initiative of the Australian Government.
Jolanda Wakkerman, board member and CFO of ICCO Cooperation: “ICCO has been a partner to enterprising people in developing countries for decades and is increasingly using investments as an instrument to contribute to social development. Through our role of sponsor investor in the C4D Asia Fund, we aim to play a catalytic role to mobilize new capital to places where it is so much needed. This strategic co-investing collaboration, created with the Dutch Foreign Ministry through the Dutch Good Growth Fund, is an exciting new chapter in innovative blended financing. The fact that our sister organization Finn Church Aid has also become a co-investor with strong links to the Finnish Ministry of Foreign Affairs, makes this an innovative cross border cooperation between public and private sector players.”
Clemens Gerteiser, Director Fund Investments of DGGF: “Our investments show us that SMEs are vital for communities to thrive and progress. By providing SMEs suitable and flexible support they will be able to prosper and have a positive impact on everyone involved, ranging from suppliers to end-customers.”
The promise of Asia and its SMEs
Asia has achieved remarkable economic progress in recent decades and its economy is expected to account for nearly two-thirds of future global growth. This impressive growth has not always translated into inclusive development patterns across and within countries. India, Indonesia and the Philippines are still coping with a wide range of social, environmental and economic challenges. SMEs have the potential to successfully address these challenges, as they play an important role in growing local economies of emerging countries. However, even with their promising nature and their favorable regional context, most SMEs in the Fund’s target countries lack access to appropriate support. C4D Partners views this segment of promising but underfinanced Asian (early) growth stage SMEs as an opportunity and has identified a wide range of companies with business models that are successful, products and services that find a growing market, and outcomes that have a positive effect on local communities. The Fund’s assets will therefore be used to support their further growth and amplify their strengths and abilities to generate positive impact.
Mark Joenje, Managing Partner and CEO of C4D Partners: “We have identified a wide range of Asian SMEs that have proven their potential to combine commercial success and bring about inclusive social change. With the first closing of the C4D Asia Fund, we will finance the growth of over 50 SMEs, enabling job creation and bringing solutions to people who still have little opportunities to secure their livelihoods and develop themselves. With our local team and strategic network, we support our portfolio companies to grow and mature and achieve the impact that benefits local societies.”
Junnu Kärkkäinen, CEO at FCA Investments: “FCA Investments is excited to enter into a new phase of development finance as part of the largest NGO in Finland. Investments can be an effective instrument for development. Together with C4D Partners we can built inclusive economies that last.”
Gender lens investing
The Fund adopts a gender balanced investment approach, in the firm believe that this will support investment decisions and outcomes. This approach is strengthened by a carry distribution dependent on the Fund achieving certain agreed gender-based targets.
Julia Newton-Howes, CEO of Investing in Women Program, an Australian government initiative: “We are pleased that C4D Partners is committed to invest in women SMEs and to integrate gender lens investing as a core element in their investment strategy. Investing in women SME’s is a solid and risk reducing investment strategy, that can lead to positive social benefits for Asia.”
Investee Support Facility
Investments of the Fund are backed by an Investee Support Facility (ISF), offering non-financial support designed to address specific needs and challenges of each SME invested in. Non-financial support is crucial to help SMEs scale up, improve performance rates, increase positive social-economic impact, and decrease investment risks at the same time. ISF is separately structured and is financed with grants. C4D Partners is committed to grow ISF and is seeking USD 1.5m in additional contributions.