East Africa Impact Investing Powerhouse
A report from The U.K. Department for International Development (DFID), The Global Impact Investing Network (GIIN) and Open Capital Advisors reveals that nearly $ 10 billion in impact investment funds have flowed to East Africa. The biggest winners are Kenya, which received almost half of this funding, followed by neighboring Uganda (13%), Tanzania (12%) and Ethopia (7%).
While impact investment in gaining traction, the overwhelming amount ($9.3 billion) came from traditional sources being the Development Finance Institutions (DFI’s) such as the World Bank. Only $ 1.4 of the total came from non DFI’s. Public Private Partnerships, such as co-financed funds consisting of private, government and/or bank backed funds prove popular.
The financial service industry attracts the lions share in capital, almost 30%. Agriculture, energy, tourism and fast-moving consumer goods, sectors which are expected to benefit from the rapidly expanding middle class in Africa, are also popular.
The report, which defines impact investing as ”those who invest with the intention to generate a beneficial social or environmental impact alongside a financial return” also notes some of the challenges faced by the impact sector. One is that it is tricky to measure it’s success, as some investors are pursuing profits over beneficial social outcome and vice versa. Another reasons is that as it is such a novel sector, few impact funds have exited investments, so their profitability (in a financial sense) remains to be seen. The impact-investing sector also faces a perception hurdle, with skeptics claiming that prioritizing social goals undermines financial ones, such as the oracle from Omaha Warren Buffet claims.
For further insights, download the report ”The Landscape for Impact Investing in East Africa” directly from thegin.com.