ACTIAM, a Netherlands based asset manager with a particular focus on sustainable investments, and the Dutch development bank FMO, have announced the final close of its ACTIAM-FMO SME Finance Fund at over €150m.

The Fund targets financial institutions in Africa, Latin America, Eastern Europe & Central Asia, and Asia, which provide access to loans and financial services to small and medium enterprises (SMEs).

With a new entry by Pensioenfonds Vervoer and an increase of commitments by two existing investors, Spoorwegpensioenfonds and Stichting Pensioenfonds Openbaar Vervoer, the fund will be able to support the growth of even more SME companies in emerging markets.

Jacques Kappé, Senior Portfolio Manager Fixed Income at SPF Beheer, said: “We made an extra commitment because the fund lives up to our expectations since we first invested in 2013. The fund enables us to offer our clients Spoorwegpensioenfonds and Stichting Pensioenfonds Openbaar Vervoer a social return next to an economic return.”

The ACTIAM-FMO SME Finance Fund provides local institutions with debt funding.

Since the launch of the fund in 2013, over €103m in loans to 25 financial institutions in 18 countries have been provided.

Recipients of the loans are entrepreneurs active in sectors like agribusiness, food processing and distribution, retailing, manufacturing and transportation.

Through the fund, seven mainly Dutch institutional investors implement a sustainable investment strategy that is expected to offer an attractive financial return.

Managed by the development arm of ACTIAM, ACTIAM Impact Investing, and FMO, the Fund offers institutional investors an attractive opportunity, targeting an annualized gross return of Euribor + 3-6% on a net basis.

According to a 2010 McKinsey report, 70% of SMEs in emerging markets are still underserved, resulting in an estimated global funding gap of $700-850bn.

This unmet demand for capital creates an attractive opportunity to invest in the expansion of SME portfolios in developing and emerging economies and add value to local economies.

FMO functions as the Fund’s investment manager responsible for the selection and monitoring of the financial institutions.

FMO will co-invest for at least 50% in each loan that will be provided out of the Fund.

The impact of the fund is twofold: on the one hand the growth of SME companies creates jobs, on the other hand the soft and hard requirements that ACTIAM and FMO have with respect to environmental, social and governance (ESG) aspects make local banks and their SME clients work in a socially responsible manner and enable them to further improve their practices.

"Hence, the fund contributes to a more professional and sustainable financial sector and business practice in emerging markets," FMO said in a statement.