Experts have said that private sector involvement is critical to a sustainable impact investing capital for Nigeria and the rest of Africa. Hence there is a need to reposition impact investing to incentivize and attract more private investors.
A study conducted by Impact Investors Foundation (IIF) and Ford Foundation have found that the impact investing market grew from $1.9 billion in 2015 to $4.7 billion in 2019.
The report defines impact investing as investments made into companies, organisations, funds, with the intention to generate social and environmental impact alongside a financial return.
While almost all the investment (81%) came from Development Financial Institutions (DFIs), the private sector has largely shown reluctance in tapping into the burgeoning market. Apart from DFIs, in Nigeria the burden of social impact projects are mostly borne by the government.
Speaking during the BusinessDay session on Impact Investing & Funding SDGs in Nigeria at the ongoing Social Media Week, Maryam Uwais, special adviser to President Muhammadu Buhari on Social Investment, said getting private sector participation in government’s social programmes has remained a challenge.
“The private sector wants to see immediate return on investments but social enterprise takes time. We need to develop the economic value chain of these enterprises before bringing in the private sector,” Uwais said.
A better approach could be by broadening the scope of impact investing and de-emphasising the concept as mere charity, says Professor Olayinka David-West, Academic Director, Lagos Business School.
In this case, the emphasis should be about what impact is the investment going to create.
“To achieve the SDGs, we need interventions. Interventions cost money. And these interventions must be sustainable even after the funding stops.” David-West said.
Abasi Ene-Obong, CEO, 54Gene agrees that the intent to make profit as well as positive impact could be a better selling point for private sector investors.
54Gene which has benefitted from impact investing needed to be seen as a money making business making a positive impact to be attractive to investors.
“If you have a portfolio for investment, you should have a separate portfolio for impact investing too,” Sam Nwanze, Chief Investment Officer, Heirs Holding.
The IIF and Ford Foundation report also acknowledges that most of the capital available in the market seeks commercial returns, thereby posing significant challenge in driving blended finance. Hence there is a need for further incentivization to entice investors to accept more below-market returns.
“Companies shouldn’t depend on impact investors, they should focus more on being impact companies that will attract the interest of investors,” Ene-Obong said.
However, for companies unable to mark the line between charity and profit making, Adesuwa Ighile, representative of Innocent Chukwuma the Regional Director, West Africa Ford Foundation said the foundation still deploys capital with little or no expectations on returns on investment.
The BusinessDay panel was moderated by Lehle Balde.