Lessons learned

FMO conducts evaluations, reviews and other activities to learn from past investments, help us achieve our impact goals with our customers and ensure accountability to our stakeholders. We also work on improving our learning culture by promoting best practices from across the organization.  

In 2022, we carried out several evaluations of which a selection is described below. These studies reviewed the effectiveness of our strategy, funds and investments with respect to achieving development objectives, including the degree of additionality which is key to FMO’s mandate. More information on these and other studies can be found on our website.

Evaluating FMO’s contributions towards SDG 8 

We have completed an evaluation to establish how we have has contributed towards SDG 8 – Decent Work and Economic Growth – since the adoption of Strategy 2025, as well as to identify lessons learned and ways to improve impact towards 2030. The evaluation found that FMO contributed by: 

  • Stimulating higher economic growth by growing the private sector in FMO’s focus countries. This helped support jobs at the customer level (around 30 percent are direct jobs), as well as jobs in the wider economies (around 70 percent are indirect jobs).  

  • Addressing key bottlenecks to economic growth, by increasing productivity, stimulating innovation and by indirectly financing capital constrained MSMEs.  

  • Working towards improving E&S standards with respect to quality of jobs and sustainability, both in the businesses of our customers and the wider community or industry.

At the same time, the report concluded that a more comprehensive SDG 8 framework was needed. Our updated 2030 strategy has incorporated this recommendation by defining high-level ambitions for FMO, including a focus on increased jobs supported and the decency and quality of jobs. The revision of an impact framework for SDG 8 will be included in the review of FMO’s impact management framework. 

Study into the Dutch Fund for Climate and Development (DFCD) 

The Dutch Fund for Climate and Development (DFCD) finances business solutions for climate resilience in emerging markets. It is managed by a consortium of four organizations, which manage three facilities: the DFCD Origination Facility, managed by Netherlands Development Organization (SNV) and Worldwide Fund for Nature Netherlands (WWF-NL). SNV and WWF-NL has initial discussions with organizations in the discover phase, develop bankable business cases in the structure phase and prepare full business cases in the development phase. These cases can then graduate to one of the investment facilities: the Land Use Facility, managed by FMO, or a Water Facility ('Climate Investor Two'), managed by Climate Fund Managers (CFM).  

The evaluation found that the DFCD has identified projects that are potentially bankable, but that none of the projects have progressed to the investment facilities (yet). The Consortium members bring different perspectives and have successfully overcome a lot of the challenges of working together. They have established good communications, particularly between FMO, SNV and WWF-NL. However, the evaluation also identified room for improvement in clarifying the requirements on bankability and E&S standards of the investment facilities to the origination facility, to ensure a smooth graduation process. Since the evaluation multiple projects have graduated and several other projects are scheduled to graduate in 2023.

The evaluation also found that some of the projects in the origination phase would not have been pursued or have the potential to become bankable, without the work of the DFCD Origination Facility. If such projects were to graduate, it would indicate a high degree of additionality. 

Study into FMO’s role in the off-grid sector 

For more than ten years, FMO has been financing companies that provide electricity solutions to people living remotely. A new evaluation on the role of FMO in the off-grid sector concludes that FMO has played a significant role in the development of this market by tailoring its support to the different needs in the sector. FMO was one of the very first to support innovative companies with their journey in this sector. Doing business in this sector has proven to be challenging. The evaluation confirmed that there are very few companies that have sustained profit for multiple years, which is why commercial investors are reluctant to invest in this sector. 

Seeing the potential impact that this sector could bring to people living remotely, FMO supported 19 companies with over US$170 million in funding, some 80 percent of which came from Dutch Government funds. The evaluation concluded that this funding has been crucial in providing investees with both the volume and the type of financing needed to realize their impact and commercial ambitions.

FMO’s additionality is in investing in projects that would otherwise not have been viable. FMO developed a proof of concept and has offered new financing products to fit these companies’ needs. As such, it helped grow unproven business models. The study found that FMO’s commercial acumen, due diligence and expertise are highly valued by investees and co-investors. Furthermore, the combination with FMO’s non-financial support to the off-grid sector helped to develop more resilient and responsible business models. 

The evaluation identified three key recommendations for companies and investors:  

  • Off-grid electricity providers must identify their specialization in the value chain to achieve commercial success, for which there is no single blueprint. Companies must find their specialization based on market circumstances and their own capabilities to achieve success. 

  • Companies must respond flexibly to customer demands and move into adjacent product markets. Companies will need to continue to innovate and offer high-value products, leveraging established distribution networks to provide access to energy. To become and remain commercially viable, companies will need to add new products and services, in many cases moving beyond a pure energy access focus.  

  • The role of DFIs and the broader financing community must evolve to reflect the conditions in different markets. The sector is starting to mature in certain markets, with some companies reaching a stable track record and sales reaching saturation. DFIs will have to move out of debt provision for well-capitalized, standalone solar system providers and support earlier-stage ventures and/or less developed regional markets. 

Study on customer MFI Index 

FMO, through the support of MASSIF, is a founding partner of the MFI Index, a sector-wide benchmark for impact performance. The MFI Index, led by 60 Decibels, gathers outcome data from MFI borrowers to provide insights to MFIs and investors on achieved outcomes in such areas as financial access, employment, business outcomes, and access for people below different poverty lines. FMO supports this initiative as it has the potential to capture social outcomes at the end-customer level, data which is not readily available but increasingly of interest to MFIs and their investors.  

FMO financed the participation in this benchmark for two of its MFI customers. The final reports highlighted some of FMO’s and MASSIF’s impact results, such as financial access through investments in MFIs. Our customers were able to use this data to learn about their outreach to specific borrower segments, such as such as women or borrowers in rural areas. These insights will enable MFIs to adapt their product offering and services, and FMO to provide adequate support.  

Follow-up from previous evaluations 

In 2020, the Dutch Government commissioned an evaluation of FMO’s achievements around additionality, mobilization, management of E&S issues and development impact. For the past two years, we have been working on implementing action items to address the key recommendations provided in the report. In 2022, we: 

  • Updated the additionality definition and the guidance documents to reflect changes to the definition and better assess the additionality of our investments. These new guidelines will be implemented in 2023. 

  • Updated our Theory of Change as part of the Strategy 2030 development process. The new Theory of Change will be the foundation of the revised impact management framework.  

  • Launched our updated 2030 strategy, which has set an ambition to gradually open more local offices, although the choice of which countries to focus on has not yet been made.    

  • Developed toolkits for root cause analyses and after-action reviews to help us reflect, capture learnings and develop action plans. Internal capacity was made available to facilitate these reviews.  

  • Made information from complex projects more accessible to our stakeholders on our website to help readers find the information and better understand the issues and our view of them. 

In 2021, FMO commissioned a strategic study that identified the challenges with respect to investing in fragile states and provided a framework for investing in these markets. Fragile states has become a cross-cutting topic in the updated 2030 strategy and is closely linked to our ambitions towards market creation and reducing inequalities.