Impact Fund Denmark has committed an additional DKK 40 million to the Nordic Horn of Africa Opportunities Fund (NHAOF), increasing funding available to small and medium-sized enterprises in Somalia as the country continues to face pressure from conflict, climate shocks and limited access to long-term capital.

The investment, made alongside Denmark’s embassy to Somalia, will support businesses operating in sectors linked to green growth and climate resilience, including renewable energy, sustainable agriculture, food production, water infrastructure, fishing and local processing.

The Nordic Horn of Africa Opportunities Fund is managed by Shuraako, a Somalia-focused asset manager that provides financing tailored to local market conditions, where many businesses have limited access to long-duration funding.

“This is an example of how capital can be used responsibly in a very fragile market,” said Theo Ib Larsen, Managing Director and Head of Impact Partnerships at Impact Fund Denmark.

“This requires local insight, patience and a model built for the reality in which the companies operate.”

Somalia remains one of the most challenging investment environments globally, with recurring droughts, floods and displacement continuing to affect economic activity. According to UN estimates for 2025, nearly half of the population was impacted by drought, flooding or displacement during the year.

The latest investment comes as regional economic pressures are also intensifying. Rising energy and import costs linked to instability around the Strait of Hormuz are expected to add further strain to Somalia’s economy, increasing the importance of domestic production and resilient local supply chains.

Impact Fund Denmark said the additional capital would help businesses invest in expansion projects that may otherwise remain out of reach due to the shortage of long-term financing options.

One company supported through the fund is Afi Water Factory, which has expanded clean drinking water production while increasing its use of solar energy to improve operational sustainability.

The investment also reflects growing interest among development finance institutions in supporting locally managed investment vehicles operating in frontier and fragile markets, particularly where access to institutional capital remains limited.

Impact Fund Denmark additionally manages capital contributions on behalf of the European Commission, alongside its own investment activities focused on development and climate-related financing.