Launched in 2014 by the Dutch Ministry of Foreign Affairs, the Dutch Good Growth fund (DGGF) functions as a fund-of-funds, supporting local and regional investment funds in over 50 countries through its blended finance strategy.
The Dutch Good Growth Fund
Abstract
Funding is a common challenge for small and medium-sized enterprises (SMEs), especially those in the "missing middle." These companies are considered too small or risky for regular investors, but too big for microfinance funding. In rural locations, vulnerable regions, and among underrepresented groups like women and young entrepreneurs, the difficulty is considerably more severe. As such, many SMEs across these geographies fail to meet investor requirements because they lack collateral and typically have short financial histories. Without better financing opportunities, their growth can be stalled, staining their potential to contribute to grow and contribute to sustainable development.
Launched in 2014 by the Dutch Ministry of Foreign Affairs, the Dutch Good Growth fund (DGGF) is helping to bridge this gap. It functions as a fund-of-funds, supporting local and regional investment funds in over 50 countries through its blended finance strategy. These funds in turn finance SMEs that are in line with development objectives. Nearly EUR 400 million had been committed by 2024, with more than 75 funds and 14 000 firms being benefited, helping to create more than 130 000 jobs.
The DGGF takes on greater risk than many development finance institutions, backing early-stage fund managers, challenging markets, and innovative business models. This approach encourages private investment by proving what’s possible, a concept known as financial additionality.
To ensure funding reaches those who need it most, the DGGF focuses on fund managers working with women, youth, and entrepreneurs in rural or fragile regions. It also supports businesses providing essential services to low-income communities. Beyond financing, the fund helps strengthen the broader ecosystem through initiatives like the DGGF Academy and the Collaborative for Frontier Finance.
Accountability and learning are central to its strategy. The DGGF tracks financial performance alongside the broader impact of its investments, using a portfolio-based approach that balances risk and return to ensure long-term sustainability.
To tailor financing to local contexts (Principle 3), the DGGF supports fund managers that enhance access to finance for youth, women, and entrepreneurs in fragile or rural contexts, as well as SMEs offering essential services to bottom-of-the-pyramid populations. It also supports knowledge-sharing and partnership platforms such as the DGGF Academy and the Collaborative for Frontier Finance, reinforcing effective partnering (Principle 4). Monitoring and learning are central to the fund’s model (Principle 5); the DGGF actively measures both its financial and demonstration effects and uses a portfolio-based risk management approach that balances high-risk, high-impact investments with more commercially sustainable placements to maintain long-term financial health.
The DGGF ‘Financing Local SMEs’ fund offers a replicable model for how blended finance can be used to catalyse local capital markets, crowd in private investment, and build inclusive economies. Its willingness to take on early-stage risk and invest in fragile markets not only helps in building up nascent markets, but showing that it can be done with a strong level of commercial viability. According to their impact reports, the fund had enabled over 130 000 jobs through its SME investees, helping to foster sustainable economic development across a number of frontier geographies. The fund’s multi-pronged strategy -namely balancing risk and tailoring financing to local needs throughout its operations - continues to provide vital support to underserved entrepreneurs and expand the frontier of SME financing.
DGGF Impact Report (2024): https://english.dggf.nl/documents/publications/2024/10/22/dggf-impact-report-2024
2020 External Evaluation of DGGF https://www.rijksoverheid.nl/documenten/rapporten/2020/08/03/evaluation-of-the-dutch-good-growth-fund
ECORYS deep-dive on the demonstration and catalytic effects of the fund: https://english.dggf.nl/documents/publications/2024/05/31/demonstration-effects-deep-dive
Steward Redqueen deep-dive on the inclusive growth enabled by the fund: https://english.dggf.nl/latest/news/2023/09/12/newsitem-september
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