Small can be beautiful in East African impact investments

To cover the high costs of finding, making and managing impact investments in East Africa, impact investors are increasingly looking for larger, later-stage and scalable solutions.

That leaves behind smaller and earlier-stage social enterprises with viable business models and potential for meaningful impact, writes Joris de Vries of Hooge Raedt Social Venture in Tanzania. His post is worth reading in full:

Impact Investing in East Africa: It should not only be about scale

Impact investing in East Africa, says de Vries, “has partially been sold on a fallacy that it is easy to earn a buck while changing the world for the better.” Now, investors are insisting businesses scale up “in an environment where high-margin businesses — especially that of the brick-and-mortar type — are few and far between.”

Philanthropists keen for market-based models need to subsidize some investment-management costs, says de Vries. Smart subsidies would not only attract investors, but enable local fund managers to place capital “with highly impactful businesses, large and small, risky and less risky, scalable and less so,” and relieve those managers of the expectation to “realize double-digit financials returns within five to 10 years or even cover all their management costs out of the returns.”