Norway’s Real Public Private Partnership in Microfinance

24/07/2008

It’s surprisingly simple what they’ve done recently in Norway to boost their microfinance activities with 117m USD: Norfund invests 53m USD and provides expertise in how to invest in developing countries, Norad provides 1,6m USD and technincal expertise in microfinance and – the real surprise – four commercial companies invest another 53m USD and chip in with their experience in managing money. This is a genuine Public Private Partnership (PPP).

And PPP’s are hot. Everybody (in the public sectors I know of) wants them, but few know what it is. The result has been a number of PPPs that look more like ordinary procurement of services or grants for ventures that real partnerships, at least in Denmark, whereas the true partnerships have been rare.

Creating one of the world’s largest microfinance funds as a PPP is pretty cool, then. Some questions arise: Will the private and publics involved be able to complement each other and gain from it? Will the Norwegian Microfinance Initiative be able to invest its massive pool of funds without crowding out real private investors? Will the interplay between capacity development and investment work to make the institutions capable of absorbing such an amount of capital, when it is acknowledged that “growth of the microfinance sector is constrained by the limited ability of MFIs to absorb large capital inflows”?

Let’s hope Danish actors will be as innovative.

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