Financial responsibility

In order to be able to carry out its mission on a long-term basis and in order to be able to bear the high financial risks of its operations, the development finance company must be financially profitable and have a strong capital structure.

Finnfund does not pay dividends to its shareholders. All monies and profits returned by the projects to Finnfund are reinvested in new projects.

Efficiency and profitability of Finnfund’s operations

As stipulated in the Finnfund Act, the purpose of the company is not to generate a profit for the shareholders. However, in accordance with the state ownership policy, the company must operate on a self-supporting basis, covering its operational costs and risks through the profits it generates.

The state ownership policy defines profitability and cost-efficiency as the goals of the State as an owner. It also sets out that companies with special state mandate should strive for financially profitable operations.

Economically sustainable operations require that financial risks are identified, priced properly and their relation to the company's risk-bearing capacity remains manageable. Finnfund does not provide grants or soft funding, although – based on its strategy – Finnfund aims to make soft funding available to the projects it finances.

The cost-efficiency of Finnfund’s operations was assessed in 2017 by comparing operating costs to investment assets and the value of investment decisions. Finnfund’s profitability is assessed primarily by looking at return on equity. The nature of the operations may cause return on equity to vary significantly from year to year, which is why it is also calculated as a five-year moving average. Other indicators include the debt-equity ratio.

A detailed report on Finnfund’s efficiency and profitability can be found in the Report of the Board of Directors published in the Financials section of the 2017 Annual Report.

Cash flows to stakeholders

Public sector taxation

Under the Income Tax Act (30 December 1992/1535), Finnfund is a corporation exempted from income tax, and therefore the company does not pay tax on its profits to the State of Finland.

In its accounts for 2017, Finnfund reported total tax payments of EUR 571 968,79. These consisted of capital gains taxes and withholding taxes paid to target countries as follows: 

Country Type   EUR
Honduras Capital gains tax 569,630.43
Turkey Withholding tax on wages 2,338.36
Total   571,968.79


The taxes paid by project companies in the countries where they operate are among the development impacts that Finnfund seeks. Such taxes promote the public sector in developing countries and assist in providing services for their citizens. For this reason, and because of its exemption from tax in Finland, Finnfund has no incentive for active tax planning and does not do this. Finnfund is not allowed nor does it wish to promote in its operations any aggressive tax planning or tax evasion in the investee companies either.

In 2017, Finnfund prepared a new tax policy which was approved and valid starting from the beginning of 2018. Tax policy consists of Finnfund’s principles and practices to assess and promote tax responsibility in its own operations and in the projects it finances. As part of the preparation process Finnfund organized two discussion sessions during the autumn and met several Finnish and international experts. The policy was based on a discussion paper which was available on Finnfund’s website for comments by stakeholders and all interested parties. Finnfund also cooperated with other European development finance institutions. To support the implementation of the policy, internal tools have been developed to better assess project’s tax practices and financing structures before making an investment decision. Tax policy is available on the company's website.


The purpose of the company is not to generate a profit for the shareholders, and it does not distribute its profits to the owners in the form of dividends or other yields.


Due to the nature of Finnfund’s operations, the need for operational investments is very small and mainly consists of capital expenditure.

In 2017, Finnfund made 29 new investment decisions in target countries totalling EUR 201 million. Most of the investment decisions are targeted at the lower-middle-income or poorer countries both in terms of the number and the total value of decisions.

Income level Amount % EUR million %
Least developed countries 8 28 39.4 20
Other low-income countries 4 14 27.9 14
Lower-middle-income countries and territories 13 45 110.8 55
Upper-middle-income countries and territories 3 10 20.3 10
Russia 1 3 2.0 1
Total 29 100 200.5 100


Financial support and donations

Finnfund mostly refrains from providing financial support or making donations and does not engage in any activities regarded as sponsorship.

Reporting and accounting principles

Finnfund’s financial statements and the Report of the Board of Directors are prepared in accordance with the Finnish Accounting Standards (FAS) and the profit and loss account and balance sheet formats of regular companies. Finnfund is not a credit institution referred to in the Act on Credit Institutions (9 February 2007/121) and does not use the profit and loss account or balance sheet formats intended for credit institutions. Since 2013, Finnfund has presented an operational analysis in its Annual Report.

The company reports on its financial position three times per year. The annual financial statements are published in the Annual Report on the company’s website after being adopted by the General Meeting of Shareholders. At the same time, the company announces the reporting and accounting principles it has followed in the preparation of the financial statements as well as any changes in the principles. In addition, the company prepares two interim reports for internal use, for the periods January to April and January to August. The interim reports are not audited or published.

From the beginning of 2018, Finnfund will report on its financial performance quarterly, among other state-owned companies, both to the Prime Minister's Office and to the Ministry for Foreign Affairs, which is responsible for steering Finnfund. In the future, internal interim reports will be made quarterly, but will not be audited or disclosed.

In 2017, Finnfund assessed the impacts of possible transition to International Financial Reporting Standards (IFRS) on its financial reporting. As a result, however, Finnfund's Board of Directors decided to continue for the present with FAS reporting.

Finnfund generally requires its investee companies to comply with the International Financial Reporting Standards (IFRS) in their reporting in order to ensure reliability and comparability.

Under certain circumstances, Finnfund may accept financial statements and other financial reports prepared in accordance with the local standards of the target country, provided that there is no reason to doubt their reliability and that the procedure is considered justified in the current situation of the reporting company.

Read more:
Responsible tax 
Environmental and social policy 
Development results 


Finnish Fund for Industrial  
Cooperation Ltd. (FINNFUND)

Uudenmaankatu 16 B
P.O. Box 391 FI-00121 Helsinki, Finland
tel. +358 9 348 434
fax +358 9 3484 3346