May 27, 2020
“During the pandemic, we have to be prepared to step in where we are needed the most”, says Mr Robert Wihtol.
The new Chair of Finnfund’s Board of Directors, appointed this April, finds Covid-19 a great challenge but also an opportunity to finance innovative companies. Most importantly, the current situation offers Finnfund an opportunity to invest in ways that improve the lives of people who have been affected the most and generate a strong social and environmental impact.
Focus on measurable development impacts
Wihtol has worked for three and a half decades on development issues. He worked for 12 years at the International Labour Organisation (ILO), and then, for 20 years, at the Asian Development Bank (ADB). After retiring from the ADB six and half years ago, he has continued to work on development finance, as a consultant, trainer and teacher, particularly in the Philippines and China.
“In the past three decades, the world of development finance has changed significantly. Today, it is very results-oriented, with a strong focus on measurable development impacts,” Wihtol says.
“Nowadays, companies are much more open to the fact that investments also need to be sustainable and generate social and environmental impacts. This marks a fundamental change in the corporate investment mentality. This is a big plus for development finance institutions, and provides a strong foundation for our investments,” he continues.
“Today, it is taken for granted that private companies need to focus on the bigger picture, not only on the bottom line.”
For over three decades, Wihtol visited Finland mainly for summer leave. In 2019, the visits took a more professional turn, when he joined the Board of Directors at Finnfund. Then, this April, he was appointed as the Chair. He took over from Ms Ritva Laukkanen who had served the maximum of seven years.
“I view this as a wonderful opportunity to use my experience,” says Wihtol.
Covid-19 is a game changer
This spring, due to the rapid spread of the Covid-19 virus around the world, the global investment environment has undergone drastic changes. Economies in every major continent have been pushed into recession, global supply chains have come to a standstill, companies in key sectors are teetering on the brink of bankruptcy, and vast numbers of jobs have been lost. In both developing and developed countries, the Covid-19 crisis has devastated people’s personal and working lives. According to Wihtol, there will be no going back to business as usual for a long time.
“Covid-19 is a game changer. Development investment has never been easy, but now the challenges have multiplied, and the risks are greater,” Wihtol says.
According to the ILO, the crisis has already caused the loss of the equivalent of over 300 million full-time jobs.
“When we look at informal jobs, about 1.6 billion people – nearly a quarter of the world’s population – have been impacted. This means massive job losses and reduced income opportunities. The global implications for people’s lives are enormous”, Wihtol notes.
“A lion’s share of the impacted people are in Africa – but the poorer countries in Asia and Latin America are also affected. The impact of the crisis on developing countries has only recently started to hit the headlines.”
Capital is withdrawing from developing countries
In the current crisis, Wihtol sees two trends as being particularly important for Finnfund.
First, most low and middle-income countries do not have the resources to help companies to weather the storm by compensating for job losses and providing other forms of fiscal and social support. The huge burden placed on the health sector in itself is overwhelming many governments. Thus, much of the burden for surviving falls directly on private companies, which are also struggling.
“Our job is to find positive ways to support and invest in these companies. We have to see this as an opportunity. We have to be innovative”, Wihtol explains.
Second, capital is withdrawing from developing countries. There is simply less capital available, and multilateral financiers such as the IMF, the World Bank and the regional development banks are facing enormous demands. At the same time, financially constrained donor governments will be under pressure to cut their aid budgets.
“Finnfund needs to be countercyclical. That is our role – we have to be prepared to step in where we are needed the most”, Wihtol says.
According to Wihtol, Finnfund’s key sectors, such as microfinance, which provides essential support to women and the vulnerable, are an area of great need but are also full of opportunities. Financing of small and medium-sized enterprises (SMEs) is crucial to address unemployment and job losses. The agricultural sector is also facing major challenges, and supply chain and logistical constraints exacerbate the risk of food shortages.
“We need to identify hot spots and bottlenecks to focus on”, he stresses.
At a time of crisis, companies are a key source of innovation
Amidst the doom and gloom, Wihtol emphasises that there are also bright spots: in a crisis like this, private companies are a key source of initiative and innovation. Investing in such companies should be seen by Finnfund and other development financiers as an opportunity to be grasped.
“We need to work closely with our partners in developing countries to come up with good ideas. Networking with our DFI partners is important. And so is our ongoing dialogue with civil society.”
Finnfund is not an entirely new organisation to Wihtol, as he started as a Board member in 2019. How would you like to see Finnfund develop in the future?
“During my first year on the Finnfund Board I have been impressed by the dedication and professionalism of the team, which works well together”, Wihtol says. “Today, Finnfund is a well-respected internationally oriented development financier with a diverse and high-impact portfolio. I would like to see Finnfund continue to internationalise, develop and explore new ways of working. The Covid-19 crisis offers Finnfund an opportunity to explore new avenues and continue to evolve.”
During the past months, Wihtol has followed closely news reports on the effects of the crisis on developing countries – and Finnfund’s response to the changing situation.
“I am pleased to see how quickly and openly Finnfund has responded,” Wihtol observes. “As they say, the only constant in this world is change.”
Robert Wihtol started as the Chair of Finnfund’s Board of Directors in April 2020. He has had a long career in developing finance and sustainable development, including over a decade at the International Labour Organization (ILO) and two decades at the Asian Development Bank. Today, he conducts strategic studies and training programs for international financial institutions, and teaches a course on international financial cooperation at the Asian Institute of Management in Manila and the National Accounting Institute in Shanghai.
Interested to read more? Interview of Ritva Laukkanen, Finnfund’s former Chair, is available here.