Innovative Finance & Impact Investing
This project was a research and design piece of work, funded by Shell Foundation, with the purpose of uncovering the smartest use of subsidies in alternative debt funds and to test whether an impact kicker for jobs would be an appropriate way to distribute that funding. The objectives of the initiative were to:
We engaged with 5 fund managers over the course of a year to understand their fund models and test emerging hypotheses.; Phakamani Impact Capital, Inyosi Empowerment Fund , ASISA Enterprise and Supplier Development Fund, Business Partners and GroFin. We used the interaction to develop a qualitative and quantitative assessment of (i) each fund’s archetype, (ii) fund performance, (iii) potential role of “impact kickers” for job creation, and (iv) develop other metrics as proxies to sustainable job growth, (v) test appropriate mechanism for implementing performance-based “impact kickers” in order to drive incremental capital into the SGB finance.
We interviewed 6 Jobs Fund recipients in order to uncover first-hand experience of receiving jobs- linked subsidies. We specifically reached out to on-lenders rather than enterprises as the pilot project was likely to pertain to a fund manager. We used the interactions to develop a qualitative assessment of (i) benefits and challenges of jobs linked payments (ii) business model adaptations to jobs linked payment (iii) effect on cost per job (iv) suggested iterations of model.
We concluded that while it is valuable to test variants of outcomes- based contracts, in order to grow the quantum of finance for SGBs in emerging markets it is preferable to distribute concessionary capital or grant funding based on the growth and sustainability of an SGB or portfolio of SGB investments. Job growth is a by- product of such businesses, with evidence to indicate a correlation between these data points. Concessionary capital is debt, equity, guarantees, and other investments that accept disproportionate risk and/or lower returns relative to a conventional investment in order to generate positive impact and leverage commercial capital that otherwise would not be possible.Download PDF