Dutch Good Growth Fund (DGGF)

A solution to current financing issue for international enterprise in emerging markets

The new revolving €700 million Dutch Good Growth Fund offers Dutch entrepreneurs alternative financing for international projects in emerging markets in Africa, Latin America and Asia.

Entrepreneurs are searching in vain for financing for international business ventures

Traditionally, SME entrepreneurs first approach their bank. According to the Dutch Federation of Small and Medium-Sized Enterprises, 90% of the external financing of SMEs comes from the banks. However, it is becoming increasingly difficult to obtain loans from Dutch banks. DNB President Klaas Knot does not expect banks will ever resume their role as business financiers in the same way as before the credit crisis. [1]

Financing an investment in an emerging market via commercial banks is perhaps even more difficult, says Mirjam van Praag, Professor of Entrepreneurship at the University of Amsterdam. Bankers are often not as good at correctly estimating the risks of an international project. [2] Nor do Private Equity and Venture Capital always provide a solution in practice either. Consequently, entrepreneurs may miss opportunities identified abroad, while trade is crucial for the development of low and middle-income countries.

Dutch Good Growth Fund (DGGF)

In October 2013, Lilianne Ploumen, Minister of Foreign Trade and Development Cooperation, announced the framework for the new Dutch Good Growth Fund. The programme reflects the policy calling for assistance, trade and investment to be combined. The DGGF stimulates Dutch companies to do business in Asia, Latin America and Africa more frequently. Dutch knowledge and skills give a key impulse to local economies.

A revolving investment capital of a total of €700 million is available for the implementation of the DGGF in response to the missing middle phenomenon in the Dutch as well as the local business sector. The fund is subdivided into three tracks:

  • Financing of activities of Dutch small and medium-sized enterprises wanting to make development-relevant investments in low and middle-income countries. The DGGF supplements private investments through guarantees and direct financing, such as loans and participations without a profit motive.
  • Financing of activities of small and medium-sized enterprises in low and middle-income countries. The DGGF supports existing and new investment funds that provide financing to local SMEs and financial institutions.
  • Financing of Dutch small and medium-sized enterprises wanting to export to low and middle-income countries. To improve the quality of the local service industry and the productivity of the manufacturing industry, Dutch SMEs can call on the DGGF’s export credit as a supplement to the existing Export Credit Insurance. This facility focuses on smaller transactions with a term of less than one year.

Berenschot and the Dutch Good Growth Fund

In recent decades, Berenschot has helped numerous Dutch entrepreneurs and multinationals successfully expand their operations to emerging markets in Africa, Latin America and Asia. Just as with the DGGF, sustainable enterprise is an important element for us in long-term international success. Via our worldwide network of local consultants and our knowledge of the markets, we identify international opportunities and help entrepreneurs take advantage of these opportunities. Greater insight into our approach can be obtained by reading our client case studies and our book Doing Business in Africa.

The Dutch Good Growth Fund starts operations in 2014. Berenschot will closely monitor developments for you. For additional information, check out our website during the coming weeks and months.

If you are interested in knowing what the fund could do for you, contact our international team without obligation.

[1] Dagblad van het Noorden (a regional daily newspaper), Déja-vu in Groningen voor Klaas Knot, 29 September 2012, p. 27.

[2] Financieel Dagblad (financial daily newspaper), Mkb-ondernemers kijken te snel naar commerciële banken (SME entrepreneurs too quick in approaching commercial banks), 11 April 2013.

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