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TA Finance for SGBs - a scarce good down the road?

Posted By Pedro Eikelenboom, PUM Netherlands senior experts, Wednesday, September 21, 2016

Some perspective...once upon a time...

Picture yourself at a roundtable session with the topic ‘financial   instruments to support private sector development – how can business and non-profit collaborate’.  Guest speakers include a representative from a development bank, a public enterprise development agency, a non-profit and an enterprise

It reads like one of the many 'powwows' on the topic, though the invitation to this event has long but expired - it took place in October 2005 in Amsterdam, the Netherlands….


The impact investment eco-system

Fast-tracking time to 2016, there’s a new world created around impact investing. It has grown into an enormous market place for innovative financial (and non-financial) products and instruments. Where investors and prospects meet up, advised by consultants, think tanks, investment networks and so forth.

Many type of impact investors have entered the market, from banks, pension funds, wealth managers, family foundations, governments, development finance institutions and NGO’s. Hereby gradually expanding their investment portfolio into high-risk sectors like agriculture, in challenging countries, and targeting enterprises with ticket-sizes between US$ 100k – 500k.

It’s a shift (change in strategy) by some investors, with many key players shifting their ‘grant funds’ to a ‘return on investment’ portfolio. Is the eco-system creating a scarce good out of grants (in most cases being technical assistance / knowledge sharing) directed to support capacity development within enterprises? 

The true price of grants

Impact investing cannot only be about moving investment capital to riskier endeavors. It’s a combination of capital investments and non-reimbursable investments (the so-called grants). And the latter being a crucial factor in supporting the public good impact through technical assistance or capacity building trajectories for the beneficiaries. Neither is it a combination of 90-10, where grants serve as a bit of technical assistance on the side.

Reaching the enterprises that have growth potential but limited access to finance, means taking risk (call it technical assistance, capacity-building, non-reimbursable grants, first loss, equity stake, if you like) through a structured deal proposal between the impact investor, (perhaps) a development bank, an NGO, a technical service provider and so forth.

Several studies have stated that there is sufficient capital in the world to invest in small and medium sized enterprises (the ‘missing-middle’), in volatile sectors and in frontier markets. So money is not the issue – though the non-reimbursable investments are unfortunately becoming a scarce good due to policy changes within the public and non-profit sector.

However, beyond the non-profit community, grants are often perceived as ‘little strings-attached subsidies’, which require no financial returns. Of course, non-financial impact (social, environment etc.) is sought, though it’s based on expectations (outputs, outcomes). If one fails to reach the objectives, basically there’s not much harm done, it is - in the end - a grant.

How can we change this mindset? Grants do have a ‘price-tag’, value or leverage when dealing with blended finance. I’m sure, many investment deals in frontier markets would and will not happen without some flow of subsidies structured in the deal. Surely not advocating that grants should have a ROI too – next to non-monetary impact (social, environmental) -, but we should not take for granted the indirect value or direct leverage a subsidy has in the impact investment space. What can grant providers request or negotiate more in return for their contribution? Elements such as securing a seat at the board table of an investee (steer company’s public good objectives), or commit private grant funding to the related capacity-building program of an investment.  

Transferring skills & knowledge to secure ROI

Potential investment prospects (enterprises) may have fragile balance sheets, weak governance or inefficient processes. For that reason they are often initially overlooked by investors. As the impact investment marketplace is moving towards the ‘high-hanging fruit enterprises’, the power of knowledge becomes even more visible. Short-term technical assistance (related to entrepreneurship development) can strengthen an enterprise, making it robust and subsequently ‘de-risk’ its profile to potential investors.

In the case for professional volunteer service organizations (i.e. PUM, IESC, ACDI/VOCA, SES etc.) – its transfer of knowledge is as crucial as the committed capital investment to enterprises. Next to that, these organizations have a wealth of data, network and track-record in advising enterprises around the globe.

In the access to finance space for entrepreneurs, professional volunteer service organizations can play a critical role in strengthening the business competences of enterprises.

The lack of available (and/or affordable) local network of skills and experiences, that can contribute to the range of challenges an entrepreneur faces, is the gap where professional volunteer service organizations can offer qualified, experienced volunteer professionals to donate their time in transferring knowledge with entrepreneurs around the world. 

A structured approach

A structured approach on enabling enterprises in frontier markets to grow is essential and contributes into embracing entrepreneurs beyond the ‘usual suspects’. Collaboration through acknowledging and applying each other’s strengths is the way forward in achieving a sustainable return and impact through investment. And not to forget the role of governments and multilateral institutions in continuing - or at least not further reducing - ODA funded enterprise development programs. Of course, few would disagree with this conclusion, though the eco-system unfortunately exhibits far too few cases to proof otherwise.

For more insights on the role and added value of professional volunteer service organizations like PUM can have in strengthening SBG's as to de-risking their profile to impact investors, download the enclosed (full) article. 

 Attached Files:

Tags:  accelerators  Access to Finance  Business  capacity development  Capital Aggregation  early stage ecosystem  emerging markets  entrepreneurship  entrepreneurship ecosystems  impact investing  impact investment  inclusive business  Investors  partnership  Pioneering Capital  Private sector development  social business  social entrepreneurship  social impact 

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RegCharles Finance and Capital partners with Dealdey Ltd on Inclusive Business

Posted By Fortune Odjugo, RegCharles Finance and Capital Ltd, Friday, February 21, 2014

RegCharles Finance and Capital and the RegCharles Foundation have partnered with Dealdey Ltd,  an online retailer company offering deals on product and services to the general public through a dedicated online shopping portal at www.dealdey.com, on a 1 year Inclusive Business Programme to introduce small retail micro-entrepreneurs into its value chain.

RegCharles Foundation, is the not-for-profit arm of the RegCharles Group, which focuses on youth and female empowerment through entrepreneurship as well as supports capacity building and providing access to finance for indigent and marginalized youth and female entrepreneurs. This synergy is aimed at reducing unemployment by creating a platform where dealdey’s products, ranging from clothing, fashion accessories, home accessories, baby items etc are sold in bulk at over 50% discount to aspiring and existing micro-entrepreneurs. Dealdey is very interested in merchant sales to these entrepreneurs thereby reducing its inventory and constantly ensuring that it supplies up to date merchandise. To this end it has become imperative to create this business to business platform, which focuses primarily on selling the goods in bulk to another retailer at such huge discount.

RegCharles Foundation and Dealdey both share a similar passion for reducing unemployment and poverty alleviation, and this partnership aims to impact the lives of over 300 women and youths in 2014.  RegCharles Foundation is poised to provide capacity building and entrepreneurship trainings for the beneficiaries of the Initiative to sharpen their entrepreneurship skills. Eventually, they will have to opportunity to access small loans from RegCharles Foundation’s sister company, RegCharles Finance and Capital Ltd, to take advantage of the huge discounts offered by Dealdey.com, which they will resell at regular prices and make significant profit. This way, a total entrepreneur is built and the challenges surrounding capacity, access to finance and access to affordable supply of products are adequately addressed. RegCharles Foundation will also provide business support services to these entrepreneurs where needed.

The Initiative will kick off with a pilot phase that will impact 10 micro-entrepreneurs who presently have small retail businesses relating to fashion, accessories, baby items, home accessories etc.  Before disbursement of funds, successful participants will partake in an intensive Business Management Training for small and growing businesses. Presently, a call for application has been opened for these individuals to indicate interest in becoming beneficiaries and go through a screening process. Forms can be obtained from the RegCharles Foundation at N500 ($5) only.  

We are also looking to involve various governmental bodies, individuals and corporate organizations who share our passion for youth and female empowerment in through entrepreneurship to enable us scale this programme and reach more people. We will work together to provide a platform for these aspiring entrepreneurs to launch their business dreams and aspirations, as well as influence their personal transformation through further capacity development programs, and financial literacy. Also these entrepreneurs will be provided with the relevant business incubation and support to propel them into becoming more sustainable businesses thereby contributing to national development through entrepreneurship and poverty alleviation. 

Tags:  entrepreneurship  partnership  Youth 

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