Investors complain that they have a hard time finding investment ready opportunities, and entrepreneurs complain that impact investors are not willing to take enough risk. It is not simple nor easy on a continent like Africa where entrepreneurship is flourishing, but access to capital remains elusive. We know the challenges that the world is facing are numerous, but are there enough businesses out there that are working to address these issues AND that have the capacity to take on the type of capital that Impact Investors are offering? Mismatched demand and supply In the current global discourse – much is also being said about ‘the lack of investable enterprises’ – or, a pipeline of ready, scalable, innovative and investment ready enterprises that can deliver not only the envisaged impacts but also the elusive and guaranteed returns of impact investments. in other words, most of the collective effort has focused on the supply side of impact investing.īut there is an absent voice in all these policies, regulation, standardization processes – that of the actual impact enterprise, or stated differently the demand side of impact investing. Establishing policy and enabling frameworks.Agreeing on measuring and benchmarking impact methodologies.Developing the right kind of investment vehicles, instruments and products.Over the past few years, even though much has been done by many to build an impact investing ecosystem, the collective global effort has been focused on: Namely, the impact base online directory of investment vehicles, and a global deal flow platform. To tackle these issues initiatives for impact investor and entrepreneurial networks are valuable progress.įorums such as the Global Impact Investing Network, the Aspen Network, the Investors’ Circle and Toniic aggregate expertise, provide space to share knowledge, best practices and potential deals - mostly among investors, and offer valuable tools. In this emerging global market with very diverse actors, the likelihood of finding a mission and finance product match through one-on-one pitches is especially low.Ĭurrently huge potential is lost, making the “missing middle” gap and lack of low-scale, globally accessible impact investment structures a considerable drain for growth. Impact investors constantly note that they struggle to identify matching and promising ventures. Moreover, research, due diligence and monitoring costs are high for a single investor.Įven where venture capital could be mobilized, many still fear exiting may be a problem, as potential buyers are hard to find - especially when investing in social/impact enterprises. Investors often associate impact investing with high risk, unaware that many social/impact enterprises are profitable and have great potential. Secondly, even promising new impact investing structures and vehicles still exclude a large group of investors and businesses focusing on early-stage ventures. Numerous calls to action have spurred promising initiatives, but essential challenges remain: Firstly, high transaction costs prevent both investors and impact entrepreneurs from finding fruitful partnerships. Impact investing has become a hot topic and is increasingly being explored by the investor community. This financing gap is particularly problematic for social and impact enterprises, as they not only find themselves stuck in the “missing middle” gap of the ‘post start up pre scale up’ phase with other SMEs, but moreover struggle to find an investor equally committed to their social mission. And yet, a lack of access to finance for SMEs - described as “one of the greater challenges” by the World Economic Forum - has not yet been sufficiently addressed. The considerable political and economic momentum that has been built around social entrepreneurial activity is therefore not surprising. Thus, these small and medium-sized enterprises (SMEs) may just be the backbone of tomorrow’s global economy. These enterprises not only spur development and market growth, but also ensure the preservation of the very base of our global economy – environmental and social resources. The growth and success of green and inclusive business models with high impact potential is central to the challenges many emerging economies are facing.
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