Clients outside Kisumu Equity Bank branch. Social enterprises in East
Africa are expected to receive $1.2 billion in funding within the next
five years. FILE PHOTO | NATION
Social enterprises in East Africa are expected to receive $1.2 billion in funding within the next five years, says a new report.
The
report found that social impact investors have so far invested $680
million in Kenyan social enterprises with renewable energy, financial
services and Pay as you go providers emerging as favoured investment
sectors by social impact investors.
The report titled State of Social Impact Investing in Kenya
was jointly done by US-based development finance consultancy firm FR
LLC and students of the University of Virginia’s Darden MBA School of
Business.
Other sectors receiving financing were healthcare, agriculture, ecotourism, consumer goods and environmental services.
“The
research represents a first-time look into the world of social impact
equity investments in Kenya. The country is a hotbed for this developing
asset class but there is a notable lack of independent research on
social impact capital and its role in the market place,” said Charles
Gore, one of the co-authors while releasing the report.
According
to the report, social impact capital is a growing investment flow in
Kenya, representing up to $600 million in shareholdings in over 200
companies in East Africa.
Flow of funds
The report also
found that the huge flow of funds towards social enterprises is
resulting in other investors such as private equity competing for
investee companies, which are in turn driving up valuation of companies.
Competition
between social impact investors and private equity funds had driven
valuations by two to three times over the past five years.
The
report contends that supporting social impact capital’s direct
shareholdings in companies in East Africa will require a number of
developments in the sector by industry actors and stakeholders to
increase the transparency and accountability.
A total
of 89 background documents were reviewed and interviews held with 15
representatives of the Kenyan investment and private equity community
over a nine-month period.
FR LLC announced plans to
deepen and expand the research in the East African region over the next
three years and distribute its findings to the East African financial
community and governments to broaden the conversation on the benefits
and costs of this fast growing social impact financing.
Impact
investors are defined as those who invest to generate a beneficial
social or environmental impact alongside a financial return—and who seek
to measure the social or environmental returns generated by their
investments.
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