C4D Asia Fund to invest in SMEs in India, Indonesia and Philippines

Capital 4 Development Partners, a Dutch fund manager, has announced the closing of its 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 marginalised communities and targets a final closing at USD 50 million by end of 2019.

“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,” said Mark Joenje, Managing Partner and CEO of C4D Partners.

The Fund will contribute to inclusive local economies by supporting SME companies that address and solve for local challenges or industry inefficiencies. 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.

“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,” read a communiqué from C4D.

Capital 4 Development Partners BV (C4D Partners) started in 2013 as ICCO Investments BV as an initiative by ICCO Cooperation. In 2018, the fund management activities were spun off from ICCO and now, C4D Partners is an independent fund management company with offices in The Netherlands, India, Indonesia and the Philippines. C4D Partners manages impact capital and supports growing Small and Medium Enterprises (SMEs) to bring about and promote fair economic development in emerging countries.

ICCO Cooperation, a 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.

“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,” said Jolanda Wakkerman, board member and CFO of ICCO Cooperation. ICCO was founded in 1964 as a Dutch cooperative with an international organizational structure with offices in 22 countries around the world.

“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,” said Clemens Gerteiser, Director Fund Investments of DGGF. The Dutch Good Growth Fund (DGGF) is a revolving fund established by the Dutch government. A consortium consisting of Triple Jump and PwC is responsible for managing the part of the DGGF that provides financing for local SMEs in up to 68 selected countries through investing in Intermediary Funds.

SMEs in Asia

Asia’s 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.

“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,” said Junnu Kärkkäinen, CEO at FCA Investments. FCA Investments Ltd (FCAI) is a 100% owned subsidiary of Finn Church Aid, the largest Finnish international aid organization. FCAI is a company with a social mission. It aims to create sustainable jobs in developing countries, by offering affordable financial resources (e.g. loans, mezzanine capital, equity funding) and technical assistance to the entrepreneurs in the “missing middle”.

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.

“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,” said Julia Newton-Howes, CEO of Investing in Women Program, an Australian government initiative. Investing in Women is an initiative of the Australian Government to catalyze inclusive economic growth and poverty reduction in South East 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.