New Norwegian Microfinance Fund

On June 2nd 2008, Storebrand signed an agreement to establish the Norwegian Microfinance Initiative (NMI). Its ambition is to become the largest commercial microfinance fund in the World.

The Norwegian Microfinance Initiative (NMI) is a public-private partnership between government agencies and institutional investors. Norfund, a Norwegian development financial institution, will be investing on behalf of the Norwegian state, while Ferd, Storebrand, KLP and DnBNOR represent the institutional actors in the partnership. Total assets under management will be NOK 600 million, and will be divided equally between the government agency and the institutional investors.

NMI will consist of two main funds, the NMI Frontier Fund and the NMI Global Fund, in addition to a separate Technical Assistance Fund. Together the three funds should be able to cover different phases within the microfinance industry. All funds will be managed by a new Norwegian asset management company, NMI AS.

Equity, loans and guarantees
NMI will invest both directly and indirectly in microfinance institutions through equity, debt or provision of guarantees. The Technical Assistance Fund aims to strengthen the capacity of microfinance institutions and build viable and sustainable institutions. NMI will operate on a commercial basis and provide positive social impact and a sound financial return.

NMI’s vision is to contribute to the empowerment of poor people and to the creation of jobs, wealth and sustainability in developing countries.

Storebrand has been investing in microfinance since 2005. Currently NOK 100 million has been invested in the industry, divided on several different microfinance funds and institutions.

Criticism for high interest rate
Media has criticized the microfinance initiative for the high interest rates many microfinance institutions demand from their borrowers. The Director of The Development Fund, Arvid Solheim, expressed that charging an interest rate of 30 percent is "greedy".

Head of the SRI department in Storebrand, Christine T. Meisingset, comments:
– Storebrand is proud to be involved in the project – which could help numerous poor people around the world. A 30 per cent interest rate may sound a lot. However, compared to the alternative interest rate level these Third World people are able to get elsewhere, 30 per cent is actually reasonable.

She explains the apparently high interest rate by the fact that the borrowers in the conventional banking terminology are considered not credit worthy. In addition the sizes of the loans are very small and the loans are paid back in a very short time. This form of banking requires extensive administration.

Meisingset highlights the fact that operating a microfinance institution is like operating a bank, and not charity.