Provide empirical evidence of your proposed solution's success/impact at present. If your project is in the idea phase, please provide evidence that speaks to its potential impact
Social investment refers to a growing segment within the worldwide investment community that seeks to realize more than just monetary gain from leveraged activities. In some cases, the gains sought could be a measure of environmental conservation, social benefits such as the advancement of women’s causes, job creation or other such features. Tradeoffs of some financial return in exchange for increased non-monetary impact may sometimes be made within the context of assessing returns that use a more holistic measure than simple dollars and cents. While many such ventures are targeted at developing countries, it is by no means a new concept in developed ones either. However, developing countries are certainly fertile ground for such projects given that the ‘normal’ model of investing is usually a bit more challenging in such countries.
In the highly dynamic environments that African emerging economies present, the possibility of both significant profit (at higher return rates than investments in developed countries) and great social impact are clearly evident. Yet the tradeoffs that may need to be made can seem daunting at times. Nevertheless, there is no shortage of examples where such investments have been and are being made with great success.
There is evidence that venture capital for social business that worked in Asia and other developing regions. Below is a list of such organizations:
Social Investment Funds
(i) SPESA (Social Private Equity South Africa) - is a PE fund targeting investment opportunities with high social value add. It employs by using flexible financial instruments to provide funding access to entrepreneurs that may not be able to do the same via traditional models of financing. It further provides a range of non-financial assistance to investees including helping them create sustainable business models, refine service delivery models and so forth.
(ii) “Aavishkaar India Micro Venture Capital Fund” (“AIMVCF”) is a fund created to promote inclusive development in rural and semi-urban regions in India. The fund’s mission is based on the premise that promising micro, small to medium -sized enterprises (MSMEs) will help drive positive changes in the underserved regions of the country. Aavishkaar was incorporated in the form of a Trust in October 2001 and was registered with SEBI as a Venture Capital Fund in May 2002. Aavishkaar’s mission is to encourage the creation and spawning of socially relevant entrepreneurial solutions addressing local needs to help India achieve holistic sustainable economic development. To achieve this, Aavishkaar aims to support socially relevant, commercially viable and environmental friendly micro and small enterprises by providing them with early stage equity finance and management support.
(iii) Legatum Ventures is a double bottom line investor that incubates and invests in for –profit enterprises that deliver measurable social returns while generating financial returns that allow operations to be increased in both scale and scope. Its underlying philosophy is that business is development and this philosophy has led it to become a premier provider of patient capital to help entrepreneurs drive the creation and growth of sustainable businesses in developing countries.
How many firms do you expect to reach?
In terms of providing equity funds and access to business incubation, this project expects to reach 20 SMEs a year and 60 over a three year period.
What is the volume of private SME finance you aim to catalyze?
I expect to raise about 3-4 million in capital funds for the 60 entrepreneurs, who would be receiving approximately up to $50,000 -100,000 each. This initiative also seeks to raise grant funds for the business incubator which may cost approximately $600,000 for three years, after which it must be self-sustaining.
What time frame will be required to reach these targets?
I estimate approximately six months to a year.
What would prevent your solution from being a success?
Raising all the funds required in the anticipated time. In such a case, it may be that the project will start on a smaller scale or start with the incubator first.