Overcoming Barriers to Scale: Institutional impact investments in low-income and developing countries

Impact investment is a common terminology used nowadays with its actual meaning associated with the intention to encourage positive social and or environmental impact alongside an ethical financial reward.

Impact investment is a common terminology used nowadays with its actual meaning associated with the intention to encourage positive social and or environmental impact alongside an ethical financial reward. The word ‘impact investing’ or ‘impact finance’ (as otherwise referred to) was actually coined back in 2007/2008 in a meeting Rockefeller Foundation, had with a team of leaders in finance, philanthropy and development with the purpose of shaping how a ‘global industry’ initiative could be built for social and environmental impact.

Through various consideration of multiple analysis; it is understood that impact investments are presently being made through a small set of streamlined instruments. This set of streamlined instruments will include private debt, equity, guarantees, grants (as in the case of development founders), and technical assistance to name a few. The argument in this article will be to uncover the lack of enough investment options and how this significantly implies numerous opportunities to unlock investment capital in contribution to innovative financing solutions that can more easily match investors demands with that of the other party (i.e.: enterprise). This is needed in key sectors, like the agricultural sector in Sub-Saharan Africa and other parts of the World.

Impact investments are most commonly made and or targeted to benefit the poor masses, the otherwise disadvantaged and or the natural environment, with rural developing and low-income countries accounting for a large amount of accountable investments. However, impact investments are increasingly being made to drive economic growth, promote green economies, and encourage job creations through infrastructure projects and other economic boosting initiatives.

The challenges facing impact investing is vast but it is including but not limited to: shortage of impact investments deals, little of no track records of impact investments, limited and or futile exit options, lack of bankable pipeline, impact measurement, investors blindly classifying certain assets within specific industry/sector (i.e.: agricultural sector) as ‘too risky’.

There are various ways for reducing and minimizing challenges facing the impact investing industry; however, it seems the governments are far well positioned to assist while providing well-needed support to impact enterprises and impact investors. For instance, there have been talks around public-private partnerships, encouraging private sector investments and pursuing outcomes-based financing with the purpose of social and environmental impact objectives – there needs to be more of this type of initiatives happening, in other to de-risk and make better options for impact investing to scale out and happen more often to serve its purpose at large. It cannot be neglected!