Acumen Fund and AECF Discuss Innovative Approaches to Financing Pro-Poor Business
27 March 2011
Today, an increasing number of businesses find that investing in pro-poor business approaches yields not only bottom line rewards, but also poverty alleviation. However, employing these inclusive business models to produce such results can be challenging when short-term time horizons exist for capital investments and barriers to financial access persist for small and medium-sized enterprises.
During Business Call to Action's (BCtA) second webinar event on March 24, Hugh Scott, Director of the Africa Enterprise Challenge Fund, and Omer Imtiazuddin, Health Portfolio Manager at Acumen Fund, discussed the ways in which social investment funds, challenge funds and innovation tournaments can provide alternative sources of funding for pro-poor, inclusive businesses in developing countries.
Scott, a specialist on the African private sector, focused on how using a competition-based model can be a feasible way to garner more successful clients in the small and medium-sized enterprise (SME) space in Africa. "We try to select the most innovative projects that are commercially viable and have a large development impact," said Scott. Participants not only have to go through a rigorous bidding and application process, but must invest 50 percent of the project cost, guaranteeing increased stakeholder interest. By focusing on certain sectors such as agriculture, financial services, renewable energy and technologies for adapting to climate change, AECF has been able to witness a trickle-down effect throughout the value chain, which is benefiting entire regions. "We are trying to provide the minimum amount of money to a business to get them to innovate, to do a project or do a commercial activity that they otherwise wouldn't do without our money," noted Scott.
Imtiazuddin, a leading expert in microenterprise and small business development, highlighted the ways 'patient capital' is crucial in making a difference in allowing SME growth in East Africa, India and Pakistan. Debt or equity investment at an early-stage provides access to health care, water, housing, alternative energy, or agricultural inputs and is complemented by exhaustive management support services, which ensure the company has the capability to scale-up.
Acumen stresses social returns for clients and hopes to impact at least 100 million people. The fund does not aim for double-digit returns, but seeks to recoup investments. "We are looking to alleviate poverty and have that social impact, but then also get the money we've invested back to us so that we can reinvest in new companies," said Imtiazuddin.
Companies interested in competing for interest-free loans or grants from AECF can check back the website for updates on the next round of competition.
To submit a business plan for Acumen Fund's consideration, write to: businessplans@acumenfund.org.