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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<ul><li><p>1 </p><p>BOP Business and Impact Investing in Africa </p><p>JICAs Activities towards Achieving Developmental Impact </p><p>TICAD V Official Side Event by FASID The Potential of Impact Investing for African Development </p><p>May 31, 2013 </p><p>Jin Wakabayashi Director </p><p>Private Sector Partnership Division Private Sector Partnership and Finance Department </p></li><li><p>2 </p><p> JICAs Overall Activities and Assistance </p><p>JICA Technical Cooperation </p><p>Grant Aid </p><p>Japanese ODA Loans </p><p> Administrating all ODA </p><p>including Technical Cooperation, ODA Loans and Grant Aid. </p><p> Resumed support to private projects thru PSIF </p><p> The worlds largest bilateral aid agency, operating in over 150 countries and regions </p><p>Private Sector Investment Finance </p><p>Technical Cooperation, 168.8 </p><p>Loan Aid, 677.7 </p><p>Grant Aid, 102.4 </p><p>Fiscal 2010 JICAs Operation Scale Unit: JPY Billion </p><p>0 50 100 150 200 250</p><p>Electric Power and Gas</p><p>Transportation</p><p>Irrigation and flood control</p><p>Agriculture, forestry and</p><p>Mining and manufacturing</p><p>Social services</p><p>Commodity and other loans</p><p>Others</p><p>Contribution by Sector (ODA Loans, worldwide) Unit: JPY Billion </p><p>&lt; Through Government &gt; </p><p>&lt; Through Government &gt; </p><p>&lt; Through Government &gt; </p><p>&lt; Directly to Private Entities &gt; </p></li><li><p>3 </p><p> JICAs Support for Private Projects : Roles and Activities </p><p> Project Development - Assistance in Policy Making - Feasibility Study for private-led projects (PPP infrastructure, BOP business, SME projects) </p><p> Enabling Environment </p><p>- 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 </p><p> Financing - Equity/Debt Finance for Private Projects - Related TA/advisory services for both private &amp; public sectors </p></li><li><p>4 </p><p>Contract </p><p>(Off Take, etc.) </p><p> JICAs Support thru Public Private Partnerships </p><p>JICA </p><p>Government Policy and Framework </p><p>Government Portion (if any) (Government Support) </p><p>Private Portion </p><p>(Project Company) </p><p>Govern</p><p>ment </p><p>Win</p><p>dow</p><p> (R</p><p>eg</p><p>ion</p><p>al a</p><p>nd</p><p> Se</p><p>cto</p><p>r D</p><p>ep</p><p>t.) </p><p>Pri</p><p>vate</p><p> Win</p><p>dow</p><p>PPP Project </p><p>Technical Cooperation </p><p>(Law and Regulation, </p><p>Tariff Framework, </p><p>Feasibility Study (F/S), etc.) </p><p>Technical Assistance </p><p>(Capacity Development, Management Improvement, etc.) </p><p>PSIF Technical Assistance (PSIF T/A) (Capacity Development, Management Improvement, etc.) </p><p>JPN ODA Loan (Long term, Low Interest) </p><p>PSIF (Loan/Equity) </p><p>(Long term, Low Interest) </p><p>PPP F/S, BOP/FS (Private Initiated F/S) </p><p>Govern</p><p>ment A</p><p>gen</p><p>cie</p><p>s </p><p>(eg. W</p><p>ate</p><p>r S</p><p>up</p><p>ply</p><p> Co</p><p>mp</p><p>an</p><p>y, R</p><p>ailw</p><p>ay C</p><p>om</p><p>pa</p><p>ny) </p></li><li><p>5 </p><p>Objectives The BOP Business Promotion Program is to promote private </p><p>sector BOP business (inclusive business) in developing countries which contribute to meeting and responding to development challenges. </p><p> 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. </p><p>Development Challenges </p><p>JICA </p><p>BOP Business Development Perspective </p><p>Improved Development </p><p>Impact </p><p>Business Interest </p><p>Private Sector </p><p>Enhanced Business </p><p>Sustainability </p><p> BOP Business F/S Assistance: Objectives </p></li><li><p>6 </p><p>Project image: Loans for Japanese company selling and leasing solar lanterns in developing countries </p><p>JV in developing country </p><p>Equity </p><p>Loan </p><p>Japanese Company Local partner </p><p>Customers BoP </p><p>Equity </p><p>JICA PSIF </p><p>Product sales and rental </p><p>TA: supply chain management, capacity building of employees </p><p> Expected development outcome </p><p> Improvement of lives of the poor </p><p> BOP Business F/S Assistance: Project image Assistance to businesses which improve lives of the poor </p></li><li><p>7 </p><p>Growth Project Implementation </p><p> Business </p><p> Plan </p><p>Development of </p><p>Business Model </p><p>Research &amp; </p><p>Development </p><p> BOP Business F/S Assistance: Scheme </p><p>JICAs support program started in 2010. </p><p>JICAs support program for Preparatory Survey (F/S) </p><p> Study Cost : Max JPY 50mil (USD 0.5 mil.) </p><p> Study Duration : Max 3 years </p><p> Call for Proposals : Biannual </p><p> Open to only Japanese Companies, but encourages partnerships with local entities </p><p> Has held 4 calls for proposals. Received 340 proposals and selected 65 projects so far, mostly in South East/South Asia and Africa (15). </p><p>JICAs financing scheme (Private Sector Investment Finance) </p><p> Can either provide debt or equity finance to BOP business </p><p>JICAs TA program To facilitate and accelerate inclusive businesses by enhancing investment climate E.g. Capacity Building of BoPs, enhance regulatory reforms, etc. </p></li><li><p>8 </p><p> Developed microbial products as toilet sanitizer and fertilizer, with local ingredients such as rice and maize </p><p> Expected to improve hygiene in elementary school, hospital, health school and in slums </p><p> Holds hygiene promotion with the relevant ministry in Rwanda </p><p> Tied up with community health workers and promoted hygiene education with their products </p><p> Provide technical assistance for farmers Has already opened a local entity, and looking to scale </p><p>up the business </p><p>Examples of BOP businesses conducted in partnership with JICA </p><p>Organic Solutions Japan (Rwanda) Microbial products for toilet and fertilization(2010-2012) </p><p> This business model aims to develop and establish a local distribution network of nutrient enriched food in Ghana for children during the weaning period. </p><p> 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. </p><p> 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. </p><p>Ajinomoto Co., Inc (Ghana) Nutrient Enriched Food Business(2011-2014) </p><p>Ref: JICAs World (May 2013) </p></li><li><p>9 </p><p>Profitability </p><p>Social Impact </p><p>Unsuccessful projects </p><p>Traditional Investment </p><p>Philanthropy; ODA </p><p>Threshold </p><p>Thre</p><p>sho</p><p>ld </p><p>ReferenceBridge Ventures 2010 Investing FOR Impact http://www.adb.org/themes/poverty/impact-investing </p><p>Impact Investment </p><p>Finance First Investors </p><p>Socia</p><p>l Firs</p><p>t In</p><p>vesto</p><p>rs </p><p>Crowd Funding </p><p>Institutions/ NGO </p><p>IFIs PFIs </p><p>PE Funds </p><p>Impact Investing Impact investing aims not only to secure financial returns, but also to generate positive social and environmental impacts. </p></li><li><p>10 </p><p>Geographical focus as well as sector wise targets coincide with the regional/sectoral coverage of JICA assisted BOP business proposals by Japanese companies. </p><p>ReferenceJP Morgan and GIIN 2013 Perspectives on the Progress: The impact investor Survey Global Social Finance, Jan 7, 2013 </p><p>Impact Investing </p></li><li><p>11 </p><p>ReferenceJP Morgan and GIIN 2013 Perspectives on the Progress: The impact investor Survey Global Social Finance, Jan 7, 2013 </p><p>Impact Investing </p><p>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. </p></li><li><p>12 </p><p>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. </p><p>Sourcehttp://goldenmeancap.com/about/ </p><p>Impact Investing </p><p>Source: The Missing Middle Initiative (WEF, Forum of Young Global Leaders) http://www.sacca.biz/backend/media/2272010113630PM/MissingMiddleInitiativeWEFJan.10.pdf </p></li><li><p>13 </p><p>Critical factors for success </p><p>Local </p><p>Partners </p><p>Access </p><p>to </p><p>Finance </p><p>Effective</p><p>business </p><p>model </p><p>Capacity </p><p>Building </p><p>of BoPs </p><p>Optimum </p><p>Pricing </p><p>and </p><p>Targeting </p><p>Regulatory </p><p>Clearance </p><p>Critical factors for success of BOP Business ~ suggestions from JICA assisted surveys </p></li><li><p>14 </p><p> Sustainable and reliable local partners </p><p> Strong commitment by top management </p><p>Keys to success </p><p>Bottlenecks </p><p>Critical factors for success of BOP Business ~ interviews with companies supported by JICA </p><p> Government regulations </p><p> Lack of information of finding suitable and reliable local partners </p><p> Difficulties in establishing a distribution network </p><p> Low profitability and long term cost recovery </p><p> Financing Gap (at start up/early stages) for SMEs </p></li><li><p>15 </p><p>15 </p><p>Issues of Access to Finance For SME led projects Lack of capital at start up/ early stages of the project. Japanese FIs are very conservative in making investment </p><p>decisions for such projects. Social financing/ impact investing market in Japan is at </p><p>emerging stage. </p><p>For Large/medium size companies Difficulty to obtain board approvals for investments in BOP </p><p>businesses </p><p>From JICAs Standpoint High administrative/monitoring cost to providing debt </p><p>instruments through JICAs PSIF facility for SME projects </p><p> Need flexible/innovative financing options which can cover risks at start up/ early stages of the project Need objective tools to measure/monitor social impact (developmental effects) of BOP business </p><p>Critical factors for success of BOP Business ~ Bridging the Financing Gap </p></li><li><p>16 </p><p>16 </p><p>JICAs Support to BOP Business : Future direction </p><p>Continuous support through F/S Program </p><p> Continue support for </p><p>preparation of F/S to help realize successful businesses </p><p>Impact Assessment </p><p> Assessment of developmental effects of BOP business is necessary when seeking for alternative funding resources (impact funding) </p><p> JICA needs to ensure each business which JICA supports has relevance with developmental impact </p><p>Strengthening of ecosystem </p><p> JICAs strength lies in the network and experience of working with governments in developing countries </p><p> Enhancing an investor friendly environment through JICAs technical cooperation </p><p>Financing </p><p> The scale of business is sometimes too small for FIs to finance (= Missing Middle) </p><p> Introduction of innovative financing mechanisms (fund, etc.) to facilitate funding to smaller businesses at start-up and/or early stages </p></li><li><p>17 </p><p>1. Private Sector Investment Finance (PSIF) - Equity participation to Funds dedicated to funding social projects - Extending debt finance to social projects - Seek ways to facilitate local financial transactions </p><p>2. Japanese ODA Loan (Yen Loan) - Extending Yen Loans to local banks in order to facilitate finance to end users </p><p>*The ideas mentioned above do not constitute any financial commitment of JICA to a particular project. </p><p>JICAs Support to BOP Business Seeking new ideas to Filling the Financing Gap </p></li><li><p>18 </p><p>Bottlenecks </p><p> - Insufficient investment climate/regulatory regimes </p><p> - Limited access to capital </p><p>Ideas for JICA support </p><p> - Technical cooperation for improvement of investment </p><p> climate (policy advisory services) </p><p> - Technical cooperation to promote HRD for BOP </p><p> businesses </p><p>JICAs Support to BOP Business Creating an Enabling Environment for Stakeholders </p></li><li><p>19 </p><p>JICAs Support to BOP Business Conducting Social Impact Assessment to BOP business </p><p>ReferenceJP Morgan and GIIN 2013 Perspectives on the Progress: The impact investor Survey Global Social Finance, Jan 7 2013 </p><p>There is a growing trend to effectively utilize social impact assessment tools for impact investing/BOP business in addition to financial assessment in order to measure social/ environmental values of a particular project. JICA seeks to establish user friendly assessment tools a) to be used by Japanese companies venturing into BOP businesses to measure the social value of a particular project, and b) to be used by impact investors to effectively evaluate/monitor BOP business projects (including JICA itself) </p></li><li><p>20 </p><p>JICA Bonds as an Impact Investing tool </p><p>JICA Bonds </p><p>Source: Nihon Keizai Shimbun (Nov 20, 2012) </p><p>In November 2012, JICA issued its first JICA Bond for individual investors. JICA, as a development institution, extends technical cooperation, ODA loans and grants, and Private Sector Investment Finance to emerging/developing countries in order to resolve various development issues including MDGs, economic/social infrastructure etc. and to achieve positive developmental effects. Supporting JICAs activities through investments in JICA Bonds is one way of impact investing. </p></li><li><p>21 </p><p>Country Project title </p><p>1 Indonesia Utilization of slag for fertilizer in peat swamp area to improve agricultural productivity </p><p>2 Indonesia Hybrid type education business in Indonesia </p><p>3 Cambodia Social investment for the development of BOP business </p><p>4 Vietnam Production of bio ethanol </p><p>5 Bangladesh Rainwater tank with microcredit system </p><p>6 Bangladesh Collaboration with Grameen Shakti on CDM by introduction of micro energy utility system in rural areas in Bangladesh </p><p>7 India Poverty reduction business for safe water supply and establishment of its supply chain </p><p>8 India Commercialization of stationeries for the profit generation of BOP </p><p>9 Sri Lanka Water supply project </p><p>10 Kenya Solar Lantern Business </p><p>11 Kenya Long-lasting Insecticidal Net For The Poor </p><p>12 Tanzania Jatropha Production </p><p>13 Tanzania Production of Solid Fuel For Households and SMEs </p><p>14 Rwanda Project for development of Microbial Material for Agriculture and Public Health </p><p>15 Mozambique Energy Conversion Project </p><p>16 Ghana Off-grid Energy Solutions in Unelectrified Area </p><p>17 Ghana Nutrient Enriched Food Business </p><p>18 Ghana Road Maintenance Business in Rural Villages By Using DONOU(sandbag) </p><p>19 Senegal Village Water Supply With Clean Water System in West Africa </p><p> Preparatory Survey (BOP Business Promotion) List of Projects (1) </p></li><li><p>22 </p><p>Country Project title </p><p>1 Indonesia Portable water supply with solar power system and small water desalination units. </p><p>2 Vietnam Development of Marine fishery resources and electrification of remote islands designated as a world natural heritage site using renewable energy system </p><p>3 India Development of leaders in rural area with remote e-education systems </p><p>4 India Development of nutritional supplementary foods </p><p>5 Bangladesh Development of production systems for green mungbean </p><p>6 Bangladesh Water supply project with a water purification system loaded on a bicycle </p><p>7 Bangladesh Safe water supply in Bangladesh with UV sanitizer </p><p>8 Bangladesh Promotion of light weight and flexible solar panels for auto rickshaw </p><p>9 Brazil Forest Conservation through Agroforestry Promotion </p><p>10 Nigeria Automobile recycling through empowerment of BOP </p><p>11 Ghana Canned fish by local production for local consumption </p><p>12 Uganda Infection control with new alcohol sanitizer </p><p> Preparatory Survey (BOP Business Promotion) List of Projects (2) </p></li><li><p>23 </p><p>23 </p><p> Country Project title </p><p>1 Indonesia Sanitation products by using microbic...</p></li></ul>

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