Developing Africa Through Effective, Socially Responsible Investing
Monday, July 7, 2014
VENTURES AFRICA – The SME space is seeing tremendous growth in Africa, with easier access to funds from financial institutions and government policies encouraging sector growth.
However there still exists a ‘missing middle’, which finds it hard to access funds due to the category of funding they belong to; people that require between $50,000 and one-two million dollars. A new system of investing; impact investing, which started in 2008 after the global financial crisis, has been addressing the needs of this ‘missing middle’.
Impact investing is enjoying rapid growth in the US, with a 2009 report from research firm the Monitor Group estimating an industry growth of $50 billion to $500 billion in assets within the next decade. Now Africa is joining the global trend and trailblazers like Issam Chleuh are helping Africa understand and enjoy the benefits of Impact Investing.
Passionate about Africa’s development, Issam founded the Africa Impact Group in 2012 and has been working towards helping Africa benefit from socially responsible investing through the activities of his organisation.
In a chat with Ventures Africa, Issam spoke about the activities of Africa Impact Group and how it is using impact investing to enrich lives.
VA: Can you introduce yourself?
My name is Issam Chleuh. I’m the founder and CEO of the Africa Impact group which is a pioneer organization that operates within the impact investing sector. We have four service lines; first advisory; second, data and rules; third, incubation and fourth research.
VA: Impact investing is relatively new in Africa. Can you shed light on it?
Issam: Like in every business, it’s important to break down the supply and the demand. Impact investing is just any financial product or financial means to obtain an end, so on the supply side you have people that invest in Entrepreneurs and on the demand side, you have people that need money for their own business.
The way the capital markets works is, at the very bottom of the pyramid, you have micro-finance institutions who loan to very small businesses like the mother selling her fruits at the market, those loans could go up to $50,000 and micro finance is serving that and has been pioneering what is impact investing today. Then, we have the commercial banks and the bigger banks, but they serve clients above one or two million annual revenue generally or net income, but for the clients, entrepreneurs, businesses, the NGOs , the foundations that are working between $50,000 or $1 – $2 million dollars, it’s hard for them to get loans or to get people to trust in their business, they cannot go to micro finance because micro finance will tell them you’re too big, they cannot go to commercial banks, they will tell them you don’t have collateral or you’re too risky, we prefer investing in small real estate projects, we prefer working with the government or with bigger institutions. So, this segment of the population is called the missing middle.