This year marks 25 years since the creation of Hivos-Triodos Fund. In 1994, the joint initiative of Hivos and Triodos Bank started as one of the first movers worldwide in financial inclusion investments. From its early beginnings, Hivos-Triodos Fund, managed by Triodos Investment Management, invested in microfinance institutions, making small loans available to entrepreneurs in disadvantaged markets in developing countries. Now, 25 years later, the fund still plays a frontrunner’s role through its support for renewable energy and sustainable agriculture initiatives, which enable tens of thousands of businesses to thrive.
Hivos-Triodos Fund’s roots can be traced to the Hivos Loan Fund, launched in 1971. Introduced as a microcredit program, the fund was initially met with resistance. Former Hivos-director Robert Sorgedrager recalls, “They looked at me as if I had spoken blasphemy. You were supposed to give to the poor!” In the 1990s, the Hivos Loan Fund was still operational, but as a risk-bearing loan fund. This, too, raised eyebrows because organizations like Hivos were not supposed to ‘play bank’. That was one of the reasons why Hivos took another bold step: cooperation with a real bank: Triodos Bank.
Back in 1994, cooperation between a development organization and a bank was unusual. But the partnership soon became recognized for how it developed the microfinance sector. As Karel Nierop, Hivos-Triodos Fund’s current fund manager explains, “When the fund was set up, microfinance did not exist at all as a sector. But over the years it has attracted an enormous amount of private and institutional money. Hivos-Triodos Fund really played a catalyzing role there, also because of its funding structure that allowed the fund to assume more risks.”
Although the fund has grown past this structure today, the combination of public and private funding from Hivos and Triodos Bank respectively remains a great example of a successful blended finance fund.
Balancing impact, risks and return
Hivos-Triodos Fund is also unique in its focus on both societal and environmental impact, and return on investment, while balancing the risks. Nierop values the discussions he has had with Hivos about this delicate balance. “We are constantly looking for the sweet spot between those three. Even though as an impact investor we have a strong focus on the risk and return balance, and Hivos focuses more on rural, marginalised areas and gender, there is great alignment between our organisations. Because you need all these components in an enterprise for it to be sustainable. At Triodos, we will not invest if there isn’t a clear positive impact to be made, but the business model needs to work as well. Hivos shares that view, and we have open conversations if needed on particular cases.”