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The Skills Development Fund is a Challenge Fund providing a demand-driven response to critical challenges facing the productive sector in Ghana.
NIRAS Fund Management Unit

Looking beyond tomorrow: NIRAS consolidates its fund management expertise

The use of innovative financing mechanisms such as grant and challenge funds as an efficient tool to achieve development results has been gaining popularity in recent years. As a natural extension of our recognised experience in managing such funds, NIRAS recently took the strategic decision to mobilise all its development financing resources into a Fund Management Unit.

23. Jul 2018

For over a decade, NIRAS has been setting up and managing different types of funding mechanisms from simple grant funds to more complex challenge funds and socially or environmentally focused impact investment funds as well as limited fund companies that engage in lending mostly in the form of credit lines or guarantees. In light of the growing movement toward the use of such mechanisms as an efficient way to distribute public development funding, NIRAS has launched a dedicated Fund Management Unit to consolidate and catalyse on our experience in this area. The Unit’s central objective is to gather tried and tested fund management experience accumulated over the years to create well-defined services – such as selection, fund administration and reporting – and state-of-the-art tools – like the SmartME online fund management system – all of which can be customized for a variety of clients and markets. The Unit also brings together a network of fund management experts, creating a community of practitioners with experience in different kinds of funds and their application in a variety of sectors and thematic areas.

Fund Management is an integral part of NIRAS’ DNA as the company’s principal owner is the NIRAS-Alectia  Foundation, committed to ethical business practices and accountability towards our customers, employees, and society. In simple terms, this means that most of NIRAS’ profit is reinvested into the business. Being backed by a fund enables NIRAS to implement long-term development strategies that focus on achieving ambitious end goals without the constraints that most international development consultancies face.

With the launch of the dedicated Unit, NIRAS’ vision is to become an international leader in fund management, using this platform to stay ahead of changes in the development aid market and look beyond tomorrow to implement sustainable, cost-effective and impactful solutions often with other interested stakeholders such as the private sector.

 

Donors are using grant and challenge funds as a key aid modality as it gives them access to private-sector finance tools and attracts additional co-financing capital from non-donor-traditional players. Such funds have become an important delivery mechanism. In parallel with this trend, in the broader development market we are seeing an increase in the number and volume of impact investment funds targeting both commercial and development results, particularly environmental and social outcomes. This involves new players, such as pension funds, and opens a massive new market of blended finance.

Magnus Cedergren, Senior Advisor Development Finance.

 

 

 

Why use funds?

Compared to traditional project activity development aid, fund management is a cost-effective method as it facilitates the support of private actors, engages a wider range of stakeholders, and involves the strategic use of development finance to mobilise additional capital, especially from the private sector. Challenge funds are particularly innovative as they trigger a competition for smart and impactful solutions. Moreover, to ensure sustainability of initiatives, effective capacity-building is key. Thus the fund management process involves a tremendous amount of technical assistance and skills transfer, the impact of which carries over long after projects end. Another fundamental part of fund management is impact evaluation, providing a clearer picture of the best places to direct money to achieve maximum effect per euro.

Funds are also a modality that can be molded to fit many purposes, sectors and client requirements. NIRAS’ strength lies in the fact that we have the experience to both set up and manage the fund administration cycle, while having the technical know-how to do so in multiple areas, including agriculture, renewable energy, civil society and skills development. Over the years, we have managed a portfolio of €293 million for a diverse group of clients across the globe thanks to our global office network in 44 countries. NIRAS is fast becoming the partner of choice for many donors looking for support through the entire fund lifecycle.

Jane Bech Larsen, Technical Director of the Fund Management Unit.

 

Types of funds managed by NIRAS

  • Challenge funds and/or demand-driven funds are a mechanism in which applicants compete openly to receive financing after responding to an open call for applications addressing a specific challenge (e.g., the Southern African Innovation Programme’s call for proposals supporting early stage entrepreneurs and incubators). This type of finance mechanism comprises more than 60% of NIRAS’ fund management portfolio.

  • Grant funds represent about 30% of the NIRAS portfolio and are more straightforward to administer as the application process is continuous and awards are granted in a discretionary manner, typically to promote a more specific agenda. Both challenge and grant funds usually have a grant-matching component whereby additional capital is mobilised to add value to the scope of the initial fund.

  • Impact investment funds are investments in companies, organizations, and funds that aim to generate a measurable social and environmental impact alongside a financial return. They are typically financed with private or philanthropic capital, but sometimes also by public monies, for a specific development purpose.

  • Fund companies are registered limited liability companies that engage in lending – usually to rural banks for further on-lending to cooperatives and the like – in the form of guarantees and credits.