impact investing in west africa, dalberg, 2011

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  • COPENHAGEN | DAKAR | GENEVA | JOHANNESBURG | MUMBAI | NAIROBI | NEW YORK | SANTIAGO | SAN FRANCISCO | WASHINGTON DC

    Impact investing in West Africa

    Afua SarkodieTypewritten Text

    Afua SarkodieTypewritten Text

    Afua SarkodieTypewritten Text

    Afua SarkodieTypewritten Text

    Afua SarkodieTypewritten Text

    Afua SarkodieTypewritten Text

    Afua SarkodieTypewritten Text

    Afua SarkodieTypewritten Text

    Afua SarkodieTypewritten TextApril 2011

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    Afua SarkodieTypewritten Text

    Afua SarkodieTypewritten Text

  • Supported by

  • AcknowledgementsThisreportwasmadepossiblethankstothegenerouscontributionsoftimeandexpertknowledgefrommanyindividualsandorganisations.TheAdvisoryTeamprovidedinvaluableinsights,guidanceand support throughout thepreparationof this report. Inaddition, special thanksgoes toall theindividualsthattookpartintheinterviewsandattendedtheimpactinvestingworkshopsinSenegal,Ghana and Nigeria in March 2011. Through the interviews and the workshops, a wealth ofexperience,understandinganddatawas sharedon impact investingactivities inWestAfrica.WewouldalsoliketothankJennyEverettoftheAspenNetworkofDevelopmentEntrepreneurs,OliverKariusofLGTVenturePhilanthropy,andourcolleaguesatDalberg,PeterTynanandAndrewStern,who also contributed their time and energy. Any errors or omissions in the report are theresponsibilityoftheEditorialTeam.AdvisoryTeamMargotBrandenburg,TheRockefellerFoundation,NewYorkJustinaLai,TheRockefellerFoundation,NewYorkWiebeBoer,TheTonyElumeluFoundation,LagosAmitBouri,TheGlobalImpactInvestingNetwork,NewYorkSapnaShah,TheGlobalImpactInvestingNetwork,NewYork

    GiselleLeung,TheGlobalImpactInvestingNetwork,NewYorkJacobSamuelson,TheGlobalImpactInvestingNetwork,NewYorkLaurieRud,TheGlobalImpactInvestingNetwork,NewYorkStephenNairne,LundinforAfrica,Vancouver

    DalbergEditorialTeamMadjigueneSock,DakarAngelaHansen,JohannesburgLiesbetPeeters,LondonSusanneNormarkChristensen,Copenhagen

    AfuaSarkodieKupka,DakarDanielaNwaobasi,DakarAbdourahmaneDiop,Dakar

  • TableofcontentsExecutivesummary......................................................................................................................1Chapter1Introduction..............................................................................................................71.1 Objectivesofthereport....................................................................................................................71.2 TheheterogeneityofWestAfrica.....................................................................................................71.3 Datagatheringandstakeholderoutreach........................................................................................91.4 Definingimpactinvesting................................................................................................................101.5 Structureofthereport....................................................................................................................12

    Chapter2Theneedandopportunity:demandside.................................................................142.1 Characteristicsandneedsofimpactinvestingsectors...................................................................142.2 Sectorswitheconomicimpact:theexampleofagriculture............................................................162.3 Sectorswithsocialimpact:theexampleofwatersupplyandsanitation.......................................182.4 Sectorswithenvironmentalimpact:theexampleofrenewableenergy........................................20

    Chapter3ImpactinvestinginWestAfrica:supplyside............................................................243.1 TheimpactinvestorecosysteminWestAfrica...............................................................................243.2 Privateequityandventurecapital..................................................................................................293.3 DevelopmentFinanceInstitutions..................................................................................................333.4 Foundations,highnetworthindividualsandprivatefamilyoffices...............................................363.5 Institutionalinvestors......................................................................................................................383.6 Microfinanceinstitutions................................................................................................................403.7 Otherimpactinvestments...............................................................................................................42

    Chapter4Barrierstoenablingmoreimpactinvestments........................................................444.1 Matchofsupplyanddemand..........................................................................................................444.2 Investmentinfrastructure...............................................................................................................464.3 Generalbusinessenvironment........................................................................................................484.4 Addressingthechallenges...............................................................................................................49

    Chapter5RecommendedactionstodevelopWestAfricasimpactinvestingindustry.............515.1 Actionsspecifictotheimpactinvestingindustry............................................................................525.2 Conclusion.......................................................................................................................................59

    AppendixAListofimpactinvestorsinWestAfrica..................................................................A1AppendixBListofinstitutionsinterviewed.............................................................................B1AppendixCCasestudies..........................................................................................................C1Endnotes..................................................................................................................................D1

  • TableoffiguresFigure1.1:Geographicalscopeoftheresearch................................................................................................8Figure1.2:FrameworkusedtoidentifyimpactinvestorsinWestAfricaandsetresearchboundaries........11Figure2.1:Sectorsthatlendthemselvestoeconomic,social,andenvironmentalimpact............................14Figure2.2:Useofimprovedsanitationfacilities............................................................................................18 Figure2.3:Useofimproveddrinkingwatersources......................................................................................18Figure2.4:Availablehydropotential(MW)inWestAfrica(2006).................................................................20Figure3.1:Mappingofimpactinvestorsbasedonrisktoleranceanddealsize............................................28Figure3.2:IFCcumulativegrosscommitmentsforWestAfricaasoftheendofFY2010(US$millions).......35Figure4.1:Challengesforexpansionandgrowthoftheimpactinvestingindustry.......................................44Figure5.1:ActionsrequiredtoincreasethescaleoftheimpactinvestingindustryinWestAfrica..............51

    TableoftablesTable1.1:OverviewofkeymacroeconomicindicatorsinWestAfricancountries...........................................9Table2.1:Overviewofenterprisefinanceneedsintheagriculturesector....................................................17Table2.2:Overviewofenterprisefinanceneedsinthewatersupplyandsanitationsector.........................19Table2.3:Overviewofenterprisefinanceneedsintherenewableenergysector........................................21Table3.1:Type,numberandsizeofimpactinvestorsinWestAfrica............................................................25Table3.2:Highlevelsummaryofthedifferencesbetweenimpactinvestortypes.......................................26Table3.3:ExamplesoffundsinvestingforimpactinWestAfrica..................................................................30Table3.4:PE/VCfundcountryfocusinWestAfrica.......................................................................................32Table3.5:ExamplesofDFIactivitiesintheregion..........................................................................................34Table3.6:FoundationsandprivatefamilyofficeswithinvestmentactivitiesinWestAfrica........................37Table3.7:ActivemicrofinancefundersinWestAfrica...................................................................................41Table3.8:MicrofinanceinvestmentvehiclesinGhanaandNigeria...............................................................41TableofboxesBoxA:ExamplesofinvestmentapproachesGrofinandE+Co......................................................................31BoxB:Impactinvestingtools..........................................................................................................................33BoxC:IndianAngelNetwork...........................................................................................................................53BoxD:TheGlobalImpactInvestingNetwork(GIIN).......................................................................................55BoxE:NigeriaIncentiveBasedRiskSharingSystemforAgriculturalLending(NIRSAL).................................56BoxF:PerusMultiFondosscheme................................................................................................................58

  • ListofacronymsADEPME lAgencedeDveloppementet

    dEncadrementdesPetitesetMoyennesEntreprises

    AfDB AfricanDevelopmentBankAFIG AdvancedFinanceandInvestment

    GroupAGRA AllianceforaGreenRevolutionin

    AfricaANDE AspenNetworkofDevelopment

    EntrepreneursBCEAO CentralBankofWestAfricaStatesBIO BelgianGovernment'sDevelopment

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