BOP Business and Impact Investing in Africa - Business and Impact Investing in Africa ... thereby making the BOP business more sustainable and ... Forum of Young Global Leaders)

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  • 1

    BOP Business and Impact Investing in Africa

    JICAs Activities towards Achieving Developmental Impact

    TICAD V Official Side Event by FASID The Potential of Impact Investing for African Development

    May 31, 2013

    Jin Wakabayashi Director

    Private Sector Partnership Division Private Sector Partnership and Finance Department

  • 2

    JICAs Overall Activities and Assistance

    JICA Technical Cooperation

    Grant Aid

    Japanese ODA Loans

    Administrating all ODA

    including Technical Cooperation, ODA Loans and Grant Aid.

    Resumed support to private projects thru PSIF

    The worlds largest bilateral aid agency, operating in over 150 countries and regions

    Private Sector Investment Finance

    Technical Cooperation, 168.8

    Loan Aid, 677.7

    Grant Aid, 102.4

    Fiscal 2010 JICAs Operation Scale Unit: JPY Billion

    0 50 100 150 200 250

    Electric Power and Gas

    Transportation

    Irrigation and flood control

    Agriculture, forestry and

    Mining and manufacturing

    Social services

    Commodity and other loans

    Others

    Contribution by Sector (ODA Loans, worldwide) Unit: JPY Billion

    < Through Government >

    < Through Government >

    < Through Government >

    < Directly to Private Entities >

  • 3

    JICAs Support for Private Projects : Roles and Activities

    Project Development - Assistance in Policy Making - Feasibility Study for private-led projects (PPP infrastructure, BOP business, SME projects)

    Enabling Environment

    - T/A for Strengthening PPP Legal/Regulatory Framework - Assistance to Related Infrastructure Development - Connecting private entities with Governments, NGO and other important development partners - Helps increase reliability and credibility to private entitys activities

    Financing - Equity/Debt Finance for Private Projects - Related TA/advisory services for both private & public sectors

  • 4

    Contract

    (Off Take, etc.)

    JICAs Support thru Public Private Partnerships

    JICA

    Government Policy and Framework

    Government Portion (if any) (Government Support)

    Private Portion

    (Project Company)

    Govern

    ment

    Win

    dow

    (R

    eg

    ion

    al a

    nd

    Se

    cto

    r D

    ep

    t.)

    Pri

    vate

    Win

    dow

    PPP Project

    Technical Cooperation

    (Law and Regulation,

    Tariff Framework,

    Feasibility Study (F/S), etc.)

    Technical Assistance

    (Capacity Development, Management Improvement, etc.)

    PSIF Technical Assistance (PSIF T/A) (Capacity Development, Management Improvement, etc.)

    JPN ODA Loan (Long term, Low Interest)

    PSIF (Loan/Equity)

    (Long term, Low Interest)

    PPP F/S, BOP/FS (Private Initiated F/S)

    Govern

    ment A

    gen

    cie

    s

    (eg. W

    ate

    r S

    up

    ply

    Co

    mp

    an

    y, R

    ailw

    ay C

    om

    pa

    ny)

  • 5

    Objectives The BOP Business Promotion Program is to promote private

    sector BOP business (inclusive business) in developing countries which contribute to meeting and responding to development challenges.

    By partnering with such businesses, JICA tries to match its development goals as underscored by our Mission Inclusive and Dynamic Development (eg. achievement of MDGs, including poverty reduction, and broader economic/social development) with the private sectors business interests, thereby making the BOP business more sustainable and enhancing its social values.

    Development Challenges

    JICA

    BOP Business Development Perspective

    Improved Development

    Impact

    Business Interest

    Private Sector

    Enhanced Business

    Sustainability

    BOP Business F/S Assistance: Objectives

  • 6

    Project image: Loans for Japanese company selling and leasing solar lanterns in developing countries

    JV in developing country

    Equity

    Loan

    Japanese Company Local partner

    Customers BoP

    Equity

    JICA PSIF

    Product sales and rental

    TA: supply chain management, capacity building of employees

    Expected development outcome

    Improvement of lives of the poor

    BOP Business F/S Assistance: Project image Assistance to businesses which improve lives of the poor

  • 7

    Growth Project Implementation

    Business

    Plan

    Development of

    Business Model

    Research &

    Development

    BOP Business F/S Assistance: Scheme

    JICAs support program started in 2010.

    JICAs support program for Preparatory Survey (F/S)

    Study Cost : Max JPY 50mil (USD 0.5 mil.)

    Study Duration : Max 3 years

    Call for Proposals : Biannual

    Open to only Japanese Companies, but encourages partnerships with local entities

    Has held 4 calls for proposals. Received 340 proposals and selected 65 projects so far, mostly in South East/South Asia and Africa (15).

    JICAs financing scheme (Private Sector Investment Finance)

    Can either provide debt or equity finance to BOP business

    JICAs TA program To facilitate and accelerate inclusive businesses by enhancing investment climate E.g. Capacity Building of BoPs, enhance regulatory reforms, etc.

  • 8

    Developed microbial products as toilet sanitizer and fertilizer, with local ingredients such as rice and maize

    Expected to improve hygiene in elementary school, hospital, health school and in slums

    Holds hygiene promotion with the relevant ministry in Rwanda

    Tied up with community health workers and promoted hygiene education with their products

    Provide technical assistance for farmers Has already opened a local entity, and looking to scale

    up the business

    Examples of BOP businesses conducted in partnership with JICA

    Organic Solutions Japan (Rwanda) Microbial products for toilet and fertilization(2010-2012)

    This business model aims to develop and establish a local distribution network of nutrient enriched food in Ghana for children during the weaning period.

    On May 30, 2012, Ajinomoto Co., Inc., the United States Agency for International Development (USAID) and JICA signed a memorandum of understanding, confirming collaborative efforts to increase the nutritional well-being of children during the weaning period.

    Ajinomoto is working in partnership not only with USAID and JICA, but also with Ghana Health Service, Ghana University, GAIN, Plan Japan and Care International.

    Ajinomoto Co., Inc (Ghana) Nutrient Enriched Food Business(2011-2014)

    Ref: JICAs World (May 2013)

  • 9

    Profitability

    Social Impact

    Unsuccessful projects

    Traditional Investment

    Philanthropy; ODA

    Threshold

    Thre

    sho

    ld

    ReferenceBridge Ventures 2010 Investing FOR Impact http://www.adb.org/themes/poverty/impact-investing

    Impact Investment

    Finance First Investors

    Socia

    l Firs

    t In

    vesto

    rs

    Crowd Funding

    Institutions/ NGO

    IFIs PFIs

    PE Funds

    Impact Investing Impact investing aims not only to secure financial returns, but also to generate positive social and environmental impacts.

  • 10

    Geographical focus as well as sector wise targets coincide with the regional/sectoral coverage of JICA assisted BOP business proposals by Japanese companies.

    ReferenceJP Morgan and GIIN 2013 Perspectives on the Progress: The impact investor Survey Global Social Finance, Jan 7, 2013

    Impact Investing

  • 11

    ReferenceJP Morgan and GIIN 2013 Perspectives on the Progress: The impact investor Survey Global Social Finance, Jan 7, 2013

    Impact Investing

    Despite growing interest in BOP businesses, impact investors in fact concentrate their investment in Venture/Growth stages of a particular project, thus a lack of capital at Seed/start-up stage.

  • 12

    Missing Middle A Missing Middle is the gap of capital financing in emerging markets that stands between micro enterprises, typically financed by microfinance institutions and medium-large enterprises, which are leveraging on traditional institutional financing. The Missing Middle provides a unique opportunity for emerging market investors to achieve competitive financial returns and positive social impact.

    Sourcehttp://goldenmeancap.com/about/

    Impact Investing

    Source: The Missing Middle Initiative (WEF, Forum of Young Global Leaders) http://www.sacca.biz/backend/media/2272010113630PM/MissingMiddleInitiativeWEFJan.10.pdf

  • 13

    Critical factors for success

    Local

    Partners

    Access

    to

    Finance

    Effective

    business

    model

    Capacity

    Building

    of BoPs

    Optimum

    Pricing

    and

    Targeting

    Regulatory

    Clearance

    Critical factors for success of BOP Business ~ suggestions from JICA assisted surveys

  • 14

    Sustainable and reliable local partners

    Strong commitment by top management

    Keys to success

    Bottlenecks

    Critical factors for success of BOP Business ~ interviews with companies supported by JICA

    Government regulations

    Lack of information of finding suitable and reliable local partners

    Difficulties in establishing a dist