NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Thursday, August 22, 2019

By Tan Zhai Yun

Private equity (PE) impact investors should look at small and medium enterprises (SMEs) in Southeast Asia as these companies are ready to embrace sustainability practices and are able to have a direct impact on society, according to Jupiter Impact Partners Pte Ltd.

The impact investing landscape in Southeast Asia is currently dominated by development financial institutions (DFI) such as the International Finance Corporation (IFC) and Asian Development Bank. Although they also invest in the SME segment, they tend to invest in less-developed markets, fewer sectors and have bigger deal sizes. At the other end are angel investors and venture capital funds that invest in start-ups.

“The other investors are taking a sector-based approach by looking at the microfinance or technology sectors. They are looking for the next unicorn. A lot of funding is skewed towards those sectors and big deal sizes. So, that leaves a funding gap for SMEs [companies with sales of between US$5 million and US$40 million],” Han Wan Hoon, head of research at the Singapore-based impact investing PE firm, tells Personal Wealth.

Photo courtesy of Chhor Sokunthea.