Jonathan Jenkins discusses the latest report on impact deal flow in East Africa and what its findings mean for the future of international social investment.
Late last year I visited Kenya to contribute to a project funded by the Department for International Development (DfID) that tried to understand the demand challenges of impact investing in East Africa.
The report of this work has now been published. We got involved in this work following our management of ‘investment-readiness’ programmes in the UK such as the Investment and Contract Fund (ICRF) and Big Potential. ICRF was a Cabinet Office grant fund that provided specialist support to help charities and social enterprises raise investment or win contracts. £14 million of grants helped to raise £233m of contracts and investments.
That was £18 for every £1 of grant. The success of this project, and the continuing popularity of Big Potential, led to the inevitable question of whether a model that had worked so well in the UK could be replicated overseas. That’s when we get involved with FSG, the authors of the report. “Catalysing Impact Deal Flow in East Africa: Recommendations for Development of the Services Market” looks at the barriers preventing more impact investment deals from happening in East Africa and provides recommendations for how to overcome them.
"The key is to design and implement a truly market-responsive intervention that helps to sustainably scale the provision of pre-investment services."
Successfully matching investors to enterprises and the ‘readiness’ of enterprises to take on investment were both identified as key barriers to future success. As for potential solutions, FSG recommend the creation of a donor-funded grant facility to help provide enterprises with the support that they need to raise capital and build capacity. The use of targeted and specific support with a clear goal in mind could make a real difference, just as ICRF did in the UK.
There would need to be differences that reflected the differences in the market - for example, providers of support often face delayed payments for their services - but the fundamental purpose of the model remains the same. Hopefully this report will help those trying to get more impact investment money flowing of the value that ‘investment readiness’ programmes can add. In the meantime, we’ll keep working to test what works in the UK and see where else it could be applied across the world.
Jonathan Jenkins was Chief Executive of Social Investment Business from September 2011 - March 2017.