In spite of the increased awareness of impact investing with the development and investment
communities, information on the impact investing sector remains limited. The Impact Investment Foundation (IIF) report was written to address this gap and to propose policy recommendations.
It builds off the work performed by the GIIN in 2015 – ‘The Landscape for Impact Investing in
West Africa: Understanding the current status, trends, opportunities, and challenges.’ At that
time, Nigeria and Ghana represented more than half (54%) of impact investing capital in the
region, with Nigeria, receiving 29 percent and Ghana receiving 25 percent of the capital deployed.
This 2019 study seeks to understand the extent to which investor experience, deal flow, and outlook
have evolved since 2015 and policy has enabled or inhibited impact investing, and in turn to
propose policy recommendations that address the issues identified.
This report looks at three sets of actors in the impact investing landscape – Supply, Demand and
Despite the macroeconomic challenges experienced in Nigeria and Ghana, the sector has seen healthy growth, with $5.9 billion in impact capital deployed since 2015. Furthermore, the number of impact investors active in the two countries increased markedly with 50 additional players since 2015.
Nigeria has experienced greater growth in deal flow compared to Ghana, with the Nigerian market now 3.9 times the size of Ghana’s ($4.7 billion in transactions in Nigeria vs. $1.2bn in Ghana since 2015, whereas in 2015 the size of the two impact investment markets was comparable).
Direct Foreign Investments continue to dominate the space, representing 97 percent of the market and an average transaction size of $56.9 million, while non-DFI transaction sizes increased moderately from
$2.2 million to $2.6 million (although with a significant volume of lower value transactions still
prevalent in the market).
A majority of the investors interviewed complained about the scarcity of investment-ready businesses. Others identified were – challenges raising funds from local funding sources; poor data availability hindering ability to make investment decisions; difficulty realizing exits given shallow nature of secondary markets; scarcity of qualified business leaders able to lead portfolio companies; and a lack of regional integration hindering the growth opportunities for portfolio companies.
Demand- Since 2015, impact capital has been heavily focused on impact-oriented companies that are still
able to deliver viable commercial returns through addressing social needs (e.g., providing
services to customers at the bottom-of-the-pyramid).
The demand for impact capital has remained restrained however, with low willingness to accept
impact investment. The harsh economic climate may have driven increased entrepreneurship,
but also contributed to high failure rates and difficulties generating investment-ready
Challenges – Access to MSME finance more broadly remains constrained, which can prevent
businesses from reaching the level of maturity needed to access impact capital.
There is a misalignment between the ecosystem intervention and what investors’ need. There is
more focus on early-stage incubation and accelerators, while programs that prepare businesses
to accept larger quantities of investment are in short supply (creating a “missing middle” of
Overall, the research found that the policy environment for impact investing remains underdeveloped but that not all constraints are binding. Both Nigeria and Ghana lack policy frameworks that explicitly support impact investing as an investment strategy. Consequently, investors face constraints across the value chain in registration, regulation, and operation.
However, not all constraints are binding. Despite challenges, the value and number of deals have grown over recent years. This implies that absent or inadequate policies are not an absolute constraint to activity.
Several areas of possible policy and advocacy intervention were identified. These policy shifts could help increase the flow of funds and build demand for impact investing assets.
Broadly, this report identifies the need for policy and advocacy efforts that can recognize impact capital as an investment strategy (enabling other targeted policy responses, ensuring impact investors operate to high standards and providing impact investors with assurance); Support local fundraising by driving outreach and advocacy to build awareness; Incentivize impact capital to coax new capital into the sector, encourage impact capital; to play its optimal role, and facilitate the layering of impact capital with other assets classes; Drive demand-side competitiveness and attractiveness through policy reforms; and Improve the ecosystem of accelerators, hubs, and incubators