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Impact investing for inclusive markets and financial systems at SEEP Annual Conference 2013
- 1. Impact Investing for Inclusive Markets and Financial Systems Paula Goldman, Omidyar Network Frederick Kellett, Aga Khan Foundation Maria Cavalcanti, FIRST Brazil Impact Roger Oakeley, Springfield Center, Moderator Investment at the Frontier November 6th, 9am-10:30am SEEP Annual Conference 2013 Partnerships and Cross-Sector Approaches
- 2. Impact Investing for Inclusive Markets & Financial Systems November 7th 2013 SEEP Annual Conference 2013 Roger Oakeley
- 3. Why Inclusive Markets? • The poor – excluded • The firm – seeks to apply more inclusive practices • How do better practices become the norm to impact at scale in The market? Impact • Improved practices are common – not isolated models Sustain -ability • Improved practices are driven by the commercial incentives of competitive advantage Scale • Other market players recognise the competitive advantage of first movers
- 4. Building firm capacity... Supporting Functions Infrastructure Skills Information Related services Infrastructure Skills Related services Information Inclusive Business Inclusive Business Standards Regulations Informal rules & norms Laws Enabling Environment Informal rules & norms Standards Regulations Laws Complexity? Cost? Realistic?
- 5. ..or building market system capacity? Private sector Supporting Functions Infrastructure Skills Information Related services Inclusive Business Civil society Standards Regulations Membership organisations Informal rules & norms Laws Representative bodies Enabling Environment Government Reducing the transaction costs facing all firms
- 6. Coordination (or competition)? Scale Investment Prepare Investment “Soft’ Investment Grants Grants Validate Tailoring the Instrument to the Opportunity Strategy vs Tactics? Process vs Grants Tools? Blueprint Investment Cycle Challenge Funds Innovation Funds Patient Capital Evolution of experience over time? Market Systems Development
- 7. Market systems development building on lessons learned USAID MicroLinks http://microlinks.kdid.org/ The Market Systems Development Platform – tbc ‘Making Markets Work for the Poor’ (M4P) Approach: - The Synthesis http://www.springfieldcentre.com/wp-content/uploads/2012/10/sp0806.pdf - The Operational Guide http://www.springfieldcentre.com/wp-content/uploads/2012/10/sp0804.pdf The Springfield Centre for Business in Development http://www.springfieldcentre.com Donor Committee for Enterprise Development (DCED) http://www.enterprise-development.org/page/m4p The Monitor Group, 2013: “The scale, range and complexity of market failure...is such that the odds are stacked against any one firm attempting to address and overcome these failures”
- 8. Priming the Pump: The Case for a Sector Based Approach to Impact Investing #PrimingThePump
- 9. The Promise of Impact Investing Market Acceleration
- 10. A Fundamental Shift is Needed To scaling entire industry sectors From just growing individual firms
- 11. “ “ “ “ Single firms are born, they mature, they get lazy and they die. But industries prosper over time and reach scale as competition fosters the delivery of better products at lower cost. Alvaro Rodriguez, IGNIA
- 13. Priming the Pump 1. Invest early stage in innovators 2. Bring more resources to sector-based infrastructure 3. Engage seriously on sector-based policy and regulatory issues
- 14. Market Adoption 1. Investing in Innovators Time INNOVATORS RISK RETURNS MF EXAMPLE SCALERS High Medium Highly Variable Commercial Grameen Bank SKS Example: Grameen Bank
- 15. Total Impact of Bridges International Academies TOTAL SOCIAL IMPACT OF BRIDGE ACADEMIES MILLIONS OF STUDENTS SERVED DERISKING OF SECTOR
- 16. 2. Invest in Sector-Based Infrastructure
- 17. 3. Engage Seriously on Issues of Policy and Politics
- 18. Policy and Politics – India Example # OF ACTIVE MFI BORROWERS IN INDIA 35 30 25 20 15 10 MILLIONS 5 0 MAR 00 MAR 01 MAR 02 MAR 03 MAR 04 MAR 05 MAR 06 SOURCE: Microfinance Information Exchange (MIX) MAR 07 MAR 08 MAR 09 MAR 10 MAR 11
- 19. The Path Forward
- 20. Where Different Types of Capital Can Play
Editor's Notes
- Overall framing: want to talk about the future of impact investing and it's true promiseImpact investing coined seven years ago, tons of enthusiasm, lots of capital waiting on the sidelines for deals perfectly derisked, high financial return
- Narrative; the key here is to shift markets - to go in early and de-risk new socially impactful models that otherwise would never get to market, but can have massive impactMF is a case in point-- started as grant capital, then breakeven, then commercial capital got tappedin the process it touched hundreds of millions of lives.yes, MF not perfect. I'll address some of those shortcomings in this presentation.but the idea here is that THIS is the true promise of impact investing. to seed entire new industry sectors- to scale them up to reach millions. It's not just about funding companies that might have gotten funded otherwise.
- What we need to do to get there: The first part is shifting our thinking from firms to sectorsNot new – in terms of individual
- Managing systemic riskKnowledge and peer to peer learning best practicesTransparency and standardsBetter than Cash – Citi, USAID
- India IIICG8
- We have the potential to do the same as we did for microfinance - but more smoothly/correcting errors - with many new industries
- Intangible- capacity building, human resources and network – e.g. school standards and assesmentsTangible- those things from which all players benefit – in MF credit bureau
- Any small shifts in the right direction affect tens of millions of lives. We are eager to collaborate with all of you on the path forward.