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Social Impact Investing And The G8

By Liz Patterson, Private Sector Development Adviser, Department for International Development (DFID)

Social Impact Investing And The G8

Adviser, Department for International Development (DFID)

Last week the UK Prime Minister hosted a G8 event on social impact investment at the Bloomberg Auditorium in London.

Social impact investments are investments that have both a social and a financial return and in the case of international development are targeted at enterprises which benefit the poor as consumers, suppliers, producers or employees. This new type of investment has the potential to catalyse private capital into international development that contributes towards the achievement of the MDGs.

Access to affordable low cost health and education services

For many poor people the only option to access health and education services are through private providers that are often unaffordable or of poor quality. In Kenya, Bridge International Academies are providing low-cost, quality education for $5 per per month to students like the Abudho family who live in a one bedroom house without electricity but still manage to send their 4 children to school. The demand for affordable education is reflected in Bridge’s phenomenal growth, with a new school currently opening in Kenya every 2.5 days.

In healthcare, LifeSpring will conduct over 12,000 deliveries in the next two years and provide quality care for more than 100,000 outpatients at 30 to 50% of market rates, while building capacity in the health system through employment of doctors, nurses and outreach workers. The hospital also aims to magnify its impact by doubling its capacity in the next two and a half years.

Enabling the market to operate effectively

At this early stage in its development, the social impact investment market faces many challenges including market fragmentation, high levels of perceived risk, lack of investment capital, limited Fund Management capacity to place investment capital and limited standardised frameworks to measure and report the social and financial performance generated by impact investments.

The G8 event last week provided a unique opportunity to accelerate the growth of this nascent market. The aim of the event was to catalyse the growing global agenda on impact investment and enable the market to operate effectively and at scale.

During the event Justine Greening, Secretary of State at DFID spoke alongside Judith Rodin, President of Rockefeller Foundation and other CEOs of impact investment Funds and Development Finance Institutions during a session which focussed on:

  • understanding the role of the impact investment in developing countries – to share learnings on how donors, investment intermediaries, not for profits and social enterprise support growth in developing countries
  • fostering the role of impact investing and international development – to catalyse additional private capital into the market and contribute towards the achievement of MDGs
  • identifying what is needed to enable the market to operate effectively and at scale in emerging markets – to begin a process of determining approaches, definitions and metrics that enable the market to grow in developing countries

The DFID Impact Programme

In December the DFID launched its new Impact Programme. As part of the programme, DFID has launched the DFID Impact Fund which is managed by CDC Group, the UK’s development finance institution. It will make investments of up to £75 million over 13 years. CDC aims to provide finance to more than 100 enterprises in Africa and South Asia via impact investment intermediaries and catalyse additional private capital. Following an open competition, CDC had over 120 proposals from Funds seeking investment and is currently undertaking due diligence on the first Fund that will invest DFID capital which, if successful, will be based in Africa.

In addition, DFID is partnering with the Global Impact Investing Network (GIIN) to support broader market development, including research and knowledge sharing on the impact investment market, resources to promote impact measurement standardisation, and a skill-building programme to increase capacity for locally-based Fund Management staff in Sub-Saharan Africa and South Asia.

The Impact Programme is managed by a Programme Coordination Unit (managed by Pricewaterhouse Coopers) working alongside CDC and the GIIN. For more information on the Programme please contact Andrew Doherty.

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