Private equity firm takes impact beyond investment

“The KKR team has a skillset to partner with businesses to enable them to grow,” said Steve Okun, Director of Public Affairs, Asia Pacific, at leading financial services firm Kohlberg Kravis Roberts (KKR). “For example, KKR’s private equity team has the expertise to improve companies’ capital structure and operations. We wanted to find a way to use these skills to help social enterprises achieve their goals, and Impact Investment Exchange (IIX) was the partner that enabled us to do that.”

In 2013, KKR partnered with IIX and Shujog to provide technical assistance to get East Bali Cashews (EBC) investment-ready. EBC is Bali’s first large-scale, environmentally friendly cashew processing facility that provides employment to women.

Scaling up

After EBC reached capacity processing 200 tons of cashews annually, EBC’s founder, American entrepreneur Aaron Fishman, found that EBC needed an additional $900,000 to scale production to 600 tons, expand its warehouse and build a second processing factory. But given the difficulty of raising just $180,000 of seed funding, Fishman was wary of the next step.

“Getting the first round of funding was hard enough, so I reached out to IIX to raise funding as well as to measure our social impact,” said Fishman. “They asked our interest in working with KKR – I had never even heard of KKR at the time – but we were happy to work with anyone who could help us.”

Rather than donating capital, members from KKR worked in a joint team with IIX and Shujog to teach Fishman how to create a comprehensive business plan that assessed the cashew sector’s fundamentals. The team also developed marketing materials and financial projections that allowed EBC’s management to communicate their plan to global investors. Their collaboration helped EBC raise $900,000 within three months, enabling the company to triple the size of its warehouse, grow its machinery from six processors to 20 and double its number of peelers. EBC brought its number of workers from 104 to 180 by December 2013, and the employees – 87% of whom are women – experienced increased income and mobility, improved health and financial security.

EBC is now opening an early learning center that offers the children of the village a first-time chance at pre-elementary school education and gives the women employed at EBC an opportunity to continue their work without concern for child care.

Private Equity’s Impact

Given financial institutions’ increasing interest in impact investing, the hope is that more firms will mimic KKR’s model of using their natural skillsets to maximize their volunteer efforts. In the case of private equity, professionals can create a blueprint the companies can follow in the long term. “Before we met KKR, we were worried about how we would sustainably grow our business,” recalled Fishman. “KKR’s team taught us a few strategies. They helped us to create a plan requiring every investor to provide both the equity needed to expand the factory and the working capital, or debt to purchase the cashews. This gave us a way to achieve financial sustainability.”

Anita Davis
Senior Manager – Public Affairs
KKR Asia Limited