African Development Bank to Launch $270m Fund for Social Impact Investors

NAIROBI – The African Development Bank is setting up a new US$270m social impact fund to support small and medium-sized enterprises.

Sydney Tetteh Hushie, a coordinator of the African Development Bank’s $300m African Education Fund and part of the team that set up the new impact fund, shared the news at today’s Impact!Africa Social Entrepreneurship Summit in Nairobi, Kenya – saying it was “big news for impact investors on the continent” and “a unique opportunity for Africa”.

The Social Investment and Impact Fund for Africa, raised from the European Union and from other development finance institutions, was agreed just last week. It will provide guarantees and equity investments of between $2.3 and $5m to intermediaries that finance social businesses, as well as grants for technical assistance. It will not invest directly into social enterprises.

A big pipeline of potential investees

Investees are likely to include established funds operating in Africa. The African Development Bank, whose mission is to spur economic development and social progress, had “quite a big pipeline already” of potential investees, said Hushie, but planned to grow that further.

Much of the discussion at the Impact!Africa event, which took place on 4-5 December 2019, highlighted the difficulty of accessing funding post-startup but before becoming big enough to attract commercial investors, known as the ‘missing middle’. Many speakers also pointed to the apparent paradox of impact investors finding insufficient investable businesses, while entrepreneurs cannot access the financing they need.

Reasons suggested for this include the fact that in Africa impact investing is still poorly understood and not yet mature, that capital from overseas goes largely to expat-led businesses, and that businesses tend to need support before they become an investment-ready prospect.

Hushie suggested the latter issue offered a “unique” market opportunity for a business that could provide investment-readiness support to social enterprises. “You’d have so much business,” he said. “You’d be providing a real solution to a major problem that we’re facing.” 

Falaq Tijani, a consultant at Nigeria-based SAHEL Capital Partners, a private equity firm that invests in agribusiness, told Pioneers Post that many entrepreneurs approached the firm when they were “not ready”. While SAHEL had its own technical assistance facility, not all funders had the time and capacity to do this, she said, and the quality of services provided by existing intermediaries such as incubators and accelerators was mixed.

Further details from the African Development Bank are expected soon.

Pioneers Post is delighted to be media partner at this week’s Impact! Africa event, which is hosted by British Council and Ashoka.