Achieving Regional Growth Through Impact Investing and Inclusive Business Models
Objectives of the Roadshow
- Promote IIF Annual Deal Summit and accompanying Investment Readiness Programme by Impact Amplifier (IA) among Impact Enterprises and Inclusive Business Companies and Investors outside of the big bubble of Lagos
- Promote impact intentionality, impact measurement and reporting by Nigerian Enterprises.
- Investors to register with IIF and inform IIF about their interests as investors.
- To receive information on investment-ready companies ahead of the actual Deal Summit (quality pipeline/lower DD cost: companies are vetted by IIF and IA and considered investment-ready)
IIF would collaborate with associations such as the SME.NG, Nigerian American Business Network, the Federal and state chambers of commerce across the 6 geopolitical zones in Nigeria, the State Investment Promotion Councils and various intermediaries such as ISN Hubs, Founders’ Institute, Impact Hub, CCHub, EHA Ventures, Abia State Government, Bedrock Initiative, Upskill Network, Enterprise Development Centre (EDC) to identify inclusive businesses/impact enterprises and investors across Nigeria to participate in the roadshow and ultimately, the T/A programme and IIF Deal Summit.
The United Nations Environment Program (UNEP), in a 2018 report on Nigeria’s sustainable finance roadmap, estimates that the country would need approximately USD92 billion annually until 2030 to successfully finance the SDGs. However, the lending environment in Nigeria is constrained, and the cost of borrowing has increased, limiting the growth of MSMEs in the country. The Central Bank’s benchmark interest rate in Nigeria increased from 11% in 2015 to 13.5% in July 2019. This significantly increased the cost of borrowing. In 2018, MSMEs received just 0.3% of the total commercial banking credit, despite contributing 48% to Nigeria’s GDP.
Although it can be observed that the interest of impact investors, both DFI and non-DFI, in Nigeria is growing, this has not yet been sustainably reflected in the capital invested: In 2019 64 impact investors operated in Nigeria, half of them with a physical presence onsite, which represents a fourfold increase between 2015 and 2019. As the number of actors grows, the overall transaction volume has increased but remains volatile. Since 2015, impact investing transactions worth USD 4.7 billion have taken place – a fraction of the amount needed to achieve the SDGs (USD 92 billion annually). The growth in deal flow in Nigeria likely reflects the greater focus that development institutions are placing on the country, as well as the opportunities presented by the sheer size of the Nigerian economy, which outweigh other challenges such as barriers to ease of doing business.
There is several elements holding back the growth of the impact investing market in Nigeria:
At the macro level, impact investors face challenges such as political and regulatory uncertainties and poor information flow, which limit the overall market entry of funds. The lack of identification with the term “impact investor”, restrictive government policies, lack of exit opportunities and difficulties in raising capital, especially in the domestic market, are some of these challenges
Challenges at the meso level hinder the development of favourable conditions for the market within institutions. For instance, impact enterprises are not organized in associations and impact investors networks are just emerging.
Investors and companies are strongly impacted by challenges at the micro level. Companies often face the difficulty of not knowing how to access funding opportunities beyond the commercial lenders, lacking awareness of the possibility of impact investing. Moreover, they are often not ready for investment and do not have the skills and capacity to develop investment maturity on their own. Support programmes often remain untapped due to their lack of visibility. Impact investors, on the other hand, face skepticism about equity financing. However, their biggest concern is the lack of investment maturity even among companies with a substantial track record.
A major challenge for Impact Investors is the difficulty in sourcing new deals and opportunities.Finding investor-ready businesses that meet both financial and impact criteria is reportedly difficult, especially women-led and owned enterprises whose businesses are now being negatively impacted by the COVID-19. The African Private Equity and Venture Capital Association (AVCA) reports that there are limited formal channels or networks that showcase impact enterprises for pipeline development and analysis, so investors rely heavily on word of mouth and their informal networks.The root causes of this challenge cuts across the entire ecosystem and as summarised into five main points:
- Limited pipeline of investment-ready enterprises.
- The lack of impact intentionality among Nigerian enterprise-owners.
- Lack of Impact Measurement and Management (IMM) standards and observance of impact measurement and reporting by Nigerian companies.
- Lack of impact investing know-how amongst Nigerian investors.
- Lack of a proper policy framework that engenders the intermediation of capital in the impact investing ecosystem.
The above invariably reduces the overall investment opportunities in Nigeria, thereby, limiting the quality of dealflows and the potential growth of the impact investing market. However, Nigeria is a country with budding social innovators and entrepreneurs who are poised to solve its myriad of social and environmental issues. There is therefore a strong need to create a platform to showcase Nigerian investment opportunities and attract both local and foreign capital into the market and this is the main objective of the 2021 Annual Convening on Impact Investing.
About the IIF Annual Deal Summit
The Impact Investors’ Foundation (IIF) is a non-profit organisation established to accelerate the growth of Impact Investing in Nigeria. It has 5 founding members consisting of the Ford Foundation, the Africa Capital Alliance, Dalberg Advisors, BusinessDay Media and the Bank of Industry. IIF’s mandate is to unlock private capital for social investments in Nigeria through our programmes and activities that are divided into 3 pillars – Knowledge Sharing and Networking, Policy Advocacy and Capacity Building. Impact investment is a sustainable way of generating social and environmental impact alongside financial returns. It provides a huge opportunity for channeling capital to bridge the SDGs funding gap in Nigeria which is valued at an annual amount of USD92 billion up till 2030. The Nigerian impact investing market which is valued at USD4.7 billion, shows huge growth potential. However, the landscape is constrained because of a myriad of challenges at the macro, meso and micro levels. Challenges at the macro level such as political and regulatory uncertainties limits funds from entering the Nigerian market; those at meso level such as lack of organisation and professionalization of impact enterprises and impact investors limits the building of market at institutional level. And at micro level, the lack of access to funding opportunities beyond the commercial lenders, limited awareness about impact investing, capacity gaps of enterprise owners further reduce investment opportunities at individual level. The Inclusive Business Action Network (iBAN) aims to fill the current gap in the Nigeria ecosystem with its matchmaking process. The matchmaking process consists of the matchmaking facility (pillar a) and the investment readiness advisory facility (pillar b). The focus of the matchmaking facility (pillar a) is to address the micro level through matchmaking facilitation which the IIF will lead. In collaboration with the investment readiness advisory facility (pillar b) who will be responsible for providing technical assistance to IBs and impact enterprises to increase their capacities. These interventions will address the limited pipeline of investment-ready businesses in Nigeria to a large extent resulting in a maximum number of deals between investors and growing IBs or impact enterprises in Nigeria. IIF is uniquely positioned to implement the matchmaking facility (pillar a) due to its primary focus on deepening and accelerating impact investment in Nigeria. IIF will take advantage of its existing programmes, network, database, resources and infrastructure to implement the project. It has strong local and international networks in the public and private sectors including investors, government and government agencies, policy makers, business leaders, intermediaries, SMEs etc. Through its affiliation with its founding members, IIF leverages on their expertise, skills, resources, and network to deliver its mandates and will do the same for this project. With a strong corporate governance structure in place, the IIF board consisting of the founding members will provide oversight and resource management over this project. IIF will also leverage on the staff strength and technical competencies of its members to provide technical and 2 operational support to enable the IIF team to carry out their functions effectively and to meet the project objectives. Ford Foundation, Bank of Industry and Africa Capital Alliance provide financial support to cover IIF operational expenses, Dalberg Advisors provides strategic and advisory support, BusinessDay Newspaper provides public relations and visibility via its media platform targeting a viewership of over 50 million Nigerians across Nigeria.
Annual Deal Summit Description
The deal summit will be a daylong event where enterprises that have successfully passed through the investment readiness programme can now pitch their businesses to potential investors based on the investor survey carried out earlier, IIF will plan the Deal Summit taking into consideration the investors’ preference such as investment stage, sector focus and investment instruments etc. Invitation will be shared to participating stakeholders to include investors, companies, observers, media etc. and IIF will follow up to ensure attendance.
A virtual platform will be used for the Deal Summit and participating companies would have the virtual background of the event. The Deal Summit will be hosted in November 2021 and it will be a day-long event with a well-drafted agenda. The agenda would show the specific timing of each companies’ presentation to give investors the opportunity to either plan to participate in the entire event or to sit in for specific interests.
The Impact Investing Market In The COVID-19 Context – An Overview Response, Recovery, and Resilience Investment Coalition June 2020
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Enterprises include – Micro, Small and Medium Enterprises (MSMEs); and Impact Enterprises (as defined by the COVID-19 Impact Consortium are “companies which pursue commercial as well as social impact objectives, including inclusive business and social enterprises”.