Thursday, April 30, 2026
News and Views from the Global South
DEVELOPMENT: Norway Launches Microfinance Project
Tarjei Kidd Olsen
- A new microfinance initiative has been launched in Norway.
The Norwegian Micro-Finance Initiative (NMI), launched on Jun. 2, kicks off with just under 120 million dollars in funds. Half of this bill will be footed by the government's investment fund for developing nations, Norfund, while the second half is contributed by four Norwegian private sector companies.
"This initiative may help many escape one of our era's greatest challenges; poverty. I am proud that competitors in Norway's financial sphere have come together with the public sphere to make this work," Norway's minister for environment and international development Erik Solheim said in a press release.
NMI consists of two funds, the NMI Frontier Fund and the NMI Global Fund, and will also focus on institutional capacity building. The funds will be used to invest both directly and indirectly in some of the many microfinance institutions in developing countries.
Microfinance institutions give small loans to poor people who cannot get loans in normal banks because of their low income.
"Our hypothesis is that it may be the slightly more unknown and slightly less well established microfinance institutions that are in particular need of our assistance," Arthur Sletteberg from the investment company Ferd told IPS.
Ferd is one of the four companies involved with NMI. Ferd's CEO Johan H. Andresen was the first to suggest the fund, in 2006.
"The NMI Frontier Fund will engage these less mature microfinance institutions, which are sometimes neglected. The NMI Global Fund is targeted towards the more mainstream institutions, while the frontier fund gives the initiative more of an edge," Sletteberg said.
It has not yet been decided which countries will be targeted by NMI, but Sletteberg thinks it will invest in Africa, and perhaps in Latin America. While Asia already has a relatively large number of microfinance institutions – most famously the Grameen Bank of Nobel peace prize winner Muhammad Yunus – no regions in the developing world are being ruled out.
Wherever possible the plan is to grant loans in local currencies in order to reduce the borrowers' vulnerability to fluctuations in international exchange rates.
"This option is not very usual," Sletteberg said. "We may not be able to do it everywhere, but we do believe, in all modesty, that it will be a major advantage for customers. Imagine that you own a small shop in Kampala. You will find that being able to loan money in your local currency, and not in dollars or euros, is a huge advantage as you will not be exposed to exchange rate fluctuations that can be completely unmanageable for your small business."
As with normal loans, interest will be added to the loans given by NMI, and some profit for the companies is expected. However, Sletteberg emphasises that while the initiative is not about charity in the traditional sense of the word, no one is expecting to get rich.
"The financial aspect is not what is tempting NMI investors – it is a wish to strengthen the position of poor peoples. But an important principle that everyone involved with NMI agrees upon is that it needs to be making money. There is a very simple reason for this: the money we loan out has to be paid back to us so that we can give loans to new people, and it has to be paid back with added interest so that we can give loans to a greater number of people."
As well as providing half of NMI's 120 million dollars in funds, Norfund will contribute its expertise in the microfinance field, as will Norway's development agency Norad. Similarly, Ferd and the three other companies involved, DnB Nor, Storebrand, and KLP, will contribute funds as well as expertise in business and finance.
According to microfinance expert Prof. Trond Randøy at the University of Agder in southern Norway, public-private microfinance partnerships are a growing trend in the West.
"A range of countries are involved with such initiatives, and particularly the Netherlands. Some have considerably greater funds than NMI, so we shouldn't expect this to save the world, but it's a promising start," Randøy told IPS.
Money is not the biggest challenge for microfinance initiatives, according to Randøy. Rather, the challenge is to ensure that the institutions that receive the funds are competent enough to administer them properly.
"There is no doubt that the quality of the institutions varies considerably. It is extremely important that the funds are placed in institutions that are both well operated and well managed, and here there is still a lot to be learned," he said.
Another key test of the future of some microfinance initiatives may be the extent to which they manage to generate large enough earnings to tempt commercial investors to stay in the game.
"I believe that the long-term ambition is that NMI will become not exactly a conventional financial institution, but an investment that the investors feel they are getting a return on. This would make it less of a development vehicle, with less subsidies, and thus bring greater potential for survival and expansion," Randøy said.
"We in fact published a research paper which indicates that it may be possible for investors to invest in microfinance institutions from a purely profit-oriented perspective. A few organisations seem to be doing that already, although in most cases profits are still lower than for conventional finance," he said.
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