Finnfund, or Finnish Fund for Industrial Cooperation Ltd., provides long term risk capital for private investors in developing countries. Being a development finance institution and an impact investor, Finnfund’s investment criteria include not only profitability, but also sustainability and positive development impacts. Sustainable forestry including commercial plantations and related industries is a strategic priority sector for Finnfund. Its forestry investments have more than doubled since 2001, now standing at close to EUR 100 million. A significant part of Finnfund’s forestry portfolio is located in Eastern Africa. To understand the development impacts of its forestry portfolio better, Finnfund commissioned Indufor to study some of its forestry investments in Eastern Africa in 2019.
Finnfund has invested in three forest industry companies in the region, in Tanzania, Uganda, and Rwanda. The main objectives of Indufor’s assignment were to assess the role of these companies in developing forestry industry in Tanzania, Uganda and Rwanda, and to assess the contribution of the companies to economic growth at local and national levels. Indufor’s team was looking into the importance of the portfolio from an industry production and trade perspective. The study focused on the role of the investment in developing both the forest sector and the local economy. Given the importance of forestry in combatting climate change and the re-emerging discussions on reforestation of Africa, the study was also looking at the contribution of the investments in increasing the forest cover in the countries included in the study.
A sawmill supported by Finnfund investments (left) and a portable sawmill representing one of the more advanced SMEs in Uganda (right).
Indufor analysed the production and market share of the three companies, prepared a forecast of these for the following 5 to 10 years, their contribution into national-level trade balance, and the competition, local impact, their importance in increasing forest cover, and the role of informal sector and use of wood for primary energy generation.
Tree growers benefit from outgrower schemes in form of quality seedlings, advice on woodlot management as well as access to markets. Outgrower schemes are one of the interventions whereby forest industries in Finnfund portfolio have an impact on the local economy.
For further information, please contact Thomas Selänniemi