The Norfund Act of 1997 states that Norfund shall “... establish viable, profitable enterprises that would not otherwise have been established because of high risk”. The mandate is further elaborated in a separate set of instructions from the Ministry of Foreign Affairs. To fulfill its mandate while attracting funds from other investors, Norfund has adopted a strategy involving geographical concentration on selected, very poor countries, as well as sectors where the investments will have pronounced development effects and where there are favourable preconditions for mobilizing expertise of international quality possessed by Norwegian cooperation partners.
Norfund has been given a development-policy mandate by the Storting and the Government, and is to form an integral part of Norwegian development assistance. Poor countries need investment in profitable enterprises that can create employment opportunities, generate tax revenues and bring in skills and technologies, and thereby contribute to economic and social development. High risk and limited knowledge make many private investors hesitant to invest in the poorest countries. For this reason, a skilled and business-oriented intermediary providing independent expertise and venture capital is required to dismantle the barriers to private investment in a profitable business sector in these countries.
For Norfund, this implies that we undertake investments that are additional to what would otherwise have happened in the market. In other words, we invest in places where there is a lack of capital and skills.
The objective of being additional has two dimensions:
1. We contribute to making more investments in difficult countries and projects, because we are willing to accept higher risk and costs than most private investors.
2. We contribute to making better investments, because we give priority to projects that have a marked development effect and we strengthen these development effects through active ownership and support to development of the enterprises.
In addition to making our own investments we act as a catalyst, by mobilizing private capital and expertise that would not otherwise have been available in poor countries.
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