Sector News – Impact Programme

Development finance institutions historically have taken a leadership role in promoting economic development and poverty alleviation in lower-income countries. In recent years, these institutions have been active in championing impact investing, thereby transitioning from stimulating economic growth at times through natural resource extraction, heavy industry, and large-scale infrastructure projects to generating inclusive growth through social enterprise.

This past December, the UK’s Department for International Development (DFID) advanced its leadership in the space, announcing a long-term Impact Programme to provide access to affordable education, healthcare, clean energy, water and sanitation, financial services, and housing to lower-income countries throughout South Asia and Sub-Saharan Africa. The novel initiative combines a £75-million pool of capital dedicated to impact fund-of-funds investments with a technical assistance facility to support the hands-on development of investee social enterprises in the target regions.

CDC Group, the UK’s development finance institution, will oversee all fund-of-funds investments over the 13-year life of the initiative, with rigorous selection criteria designed to maximize impact to beneficiaries, while also promoting financial sustainability. The program seeks to establish the foundations for long-term sources of capital into the impact investment market, with an intent to catalyze large-scale private investment.

By investing in a diverse set of high-impact funds across South Asia and Sub-Saharan Africa, CDC aims to provide finance to more than 100 enterprises benefitting over 5 million of the underserved and disadvantaged, through investments in enterprises that offer access to affordable goods and services as well as income-earning opportunities.

In addition, DFID is partnering with the Global Impact Investing Network (GIIN) to support broader market development, with an emphasis on the promotion of social and environmental performance information and the standardization of metrics assessing developmental outcomes. The initiative will also include an extensive capacity building program for locally-based fund management staff, who will be trained to identify, develop, measure, and manage impact investments.

The Impact Programme further aims to create an evidence base that demonstrates the potential for financial viability of this emerging class of investments, which can have a significant impact on development. It will provide market information about the transformational potential of enterprises which have developed products and services that can benefit underserved communities. It will also facilitate the use of IRIS metrics for consistent impact measurement and provide clear and accessible data which can be shared with the wider investment community and inform future decisions and programs.

By: Liz Patterson, DFID and Daniel Goldman, IIX.