Swiss government seeks manager for emerging markets start-ups fund with sustainability criteria

SECO vehicle has been run since inception in 1999 by Zurich’s Finance Contact

SECO, a division of Switzerland’s industry ministry, has decided to search for a new manager for a CHF18m (€16.5m) fund that finances start-up companies in emerging markets. The firms must adhere to sustainability criteria used by the International Finance Corporation (IFC) as a condition of the funding.

The request for proposal (RFP) is a first for the ‘SECO Start-up Fund’ (SSF) since its inception in 1999. The incumbent has been Finance Contact, which plans to bid for a renewal of its mandate. May 25 marks the deadline for the RFP, after which SECO will decide who manages the fund for another four years.

Asked why it had decided to conduct a search for SSF for the first time, SECO told Responsible Investor: “Swiss procurement law requires that we do the search. This says nothing about the quality of the fund’s management.”

Andreas Ragaz and Susanne Grossmann are the SSF’s Co-Managers at Zurich-based Finance Contact. “The SSF is not a microfinance fund but an arrangement where we, as an agent of the Swiss government, ensure that the loans go directly to the companies,” Ragaz told RI. Ragaz says that owing to repayments of the loans with interest, Finance Contact has provided a total ofCHF35m in funding for the start-ups in the emerging markets. Around 90 companies have received funding since the SSF’s inception. The start-ups targeted by the fund are located in places like Egypt, Ghana, South America, Peru, Vietnam, Ukraine, Macedonia and Serbia.

To qualify for the SSF’s loans, the SMEs have to have been in business no longer than three years and meet “recognised environmental and social standards.”

According to Ragaz, this means standards used by the IFC.

Such standards include banning child labour, respecting environmental standards and upholding labour rights as well as those of indigenous populations. “We also demand that Switzerland’s animal protection law, which pertains to those in captivity be respected,” said Ragaz, adding that his team was assisted by Swiss embassy officials to scrutinise loan candidates. Loans from the SSF are capped at CHF500,000 and must be re-paid in five years.

Switzerland is also home to a vibrant microfinance fund industry, including such prominent names as responsAbility of Zurich and Blue Orchard of Geneva ($3bn in assets each).