Greetings, Agents of Impact!
Signals: Financing Growing Businesses
How technology is disrupting small-business financing in emerging markets – in a good way. The COVID-19 pandemic could have been development finance’s moment to shine. Such quasi-public investors, after all, have been trying to fill a $5 trillion financing gap for emerging-markets small businesses for decades. Development finance institutions and multilateral banks committed billions of dollars in the early months of the pandemic, but little of it made it out the door in the first year, and even less found its way to small businesses that needed capital to pivot and survive. Instead, enterprising tech startups rallied to keep small businesses afloat. New players “are now making bank on an enormous market long ignored by, well, banks (and other mainstream financial institutions),” ImpactAlpha reported. Tech solutions, many conceived on the fly, are attracting capital to a long-neglected category: working capital and growth financing for small and medium-sized businesses.
- Fintech frenzy. Traditional financial institutions see informal and small businesses as too expensive or risky. Fintechs like Lidya, Prospa and PayHippo in Nigeria, Finja in Pakistan and Cassbana in Egypt see them as an untapped opportunity. In Kenya, alt-credit venture Pezesha links small businesses to both traditional and non-traditional lenders (see, “Agent of Impact, Hilda Moraa”), and MarketForce works with fintechs to unlock financing for small businesses. The People’s Fund in South Africa is crowdfunding purchase-order financing for small businesses.
- Enterprise tech. Among the software providers moving into finance are Kenya’s Sokowatch and Field Intelligence, Nigeria’s TradeDepot and Egypt’s MaxAB, which offer small lines of credit to shopkeepers using their ordering and delivery services (see, “New channel of capital for small businesses worldwide: enterprise tech startups”).
- Small and growing. Companies serving small businesses are raising big rounds. Brazilian e-commerce platform Nuvemshop raised $500 million to help mom and pop businesses set up webshops. India’s Khatabook raised $100 million to help Indian merchants move transactions online. Non-bank lenders, funds and financial intermediaries, write Susan de Witt and Drew von Glahn, “are crucial to increasing access to business finance for micro, small and medium enterprises in emerging market economies, today and long-term.”
- Keep reading. “How technology is disrupting small-business financing in emerging markets – in a good way,” by Jessica Pothering on ImpactAlpha.
- Answer The Call. Join Celo’s Daniel Kimotho, Pezesha’s Hilda Moraa, The People’s Fund’s Luyanda Jafta, Lendable’s Daniel Goldfarb, Courageous Capital’s Laurie Spengler and other Agents of Impact disrupting financing for small businesses in emerging markets, Tuesday, Nov. 16 at 8am PT / 11am ET / 7pm Nairobi. RSVP today.
Dealflow: Impactful Edtech
Evergreen Coast takes a majority stake in edtech startup DreamBox. Bellevue, Wash.-based DreamBox, launched in 2006, provides personalized math and reading content to approximately six million K-12 students and 400,000 educators in the U.S, U.K., Canada, Mexico and Australia. The personalized learning company said it is on track to reach $100 million in revenue this year.
- The Rise Fund. TPG’s impact fund, which invested $130 million in DreamBox in 2018, will retain a significant minority stake in the company. “DreamBox demonstrates the power of those business models in which social impact and financial performance are colinear,” said Rise’s Steve Ellis. The fund recently acquired a majority stake in Houston-based Teachers of Tomorrow, an alternative certification program for teachers.
- Share this post.
Oikocredit and Opportunity International commit $100 million to back education lending in low-income countries. With its lending partners, Opportunity International, a Chicago-based nonprofit, has mobilized $2.3 billion to support 8,800 schools in 30 low-income countries. Impact investor Oikocredit will back Opportunity International’s partners making loans to improve school infrastructure, support teachers and bolster tuition aid for students. The partnership aims to increase access to affordable and quality education for 1.6 million children in low-income countries, including Ghana, Kenya, Nigeria, Senegal and Uganda.
- Education access. An estimated 264 million children globally are still out of school, according to Opportunity International’s Atul Tandon. The nonprofit’s EduFinance program has facilitated $442 million in loans to keep 2.8 million students in school.
- Check it out..
Spain’s EDP Renewables acquires majority stake in Sunseap Group. The Madrid-based renewable energy producer acquired an 87.4% stake in the Singapore-based distributed solar company. Sunseap’s portfolio includes 5.5 gigawatts of solar in Vietnam, Cambodia, China, Taiwan, Japan, Thailand and Malaysia. The deal values Sunseap at S$1.1 billion ($816 million). Singaporean impact fund ABC World Asia will exit its investment in Sunseap. Dive deeper.
Dealflow overflow. Other investment news crossing our desks:
- JUMO secures $120 million to help banks expand access to financial services for consumers and small businesses in emerging markets.
- German EV maker Sono Motors launches its initial public offering in the U.S., while electric pickup truck and SUV maker Rivian will make its highly anticipated public market debut this week.
- Shell stands up a $1.4 billion fund for Shell Ventures to provide growth equity funding for energy-transition companies.
Impact Voices: Pass the Mic
Five steps investors can take to build a sustainable global supply chain. From paper towels and carbonated drinks to automobiles and chicken, people around the globe are struggling to find once-common everyday goods. The pandemic is the immediate cause. But other drivers of supply-chain issues include consumers’ appetite for on-demand goods and investors’ fixation on cost-cutting over resilience. A recent federal report found S&P 500 companies distributed 91% of net income to shareholders via stock buybacks or dividends between 2009 and 2018, leaving a declining share for research and development, new facilities or resilient production processes. “Our supply chain model has failed us. We now have an open invitation to do things differently,” Dalberg Advisors’ Yana Watson Kakar writes in a guest post for ImpactAlpha. “That will require investors to step up, put their short-term interests aside, and proactively work with corporations to build a better future.“
- Stepping up. Investors should push for incentive structures for corporate chiefs and investment managers that emphasize longer-term outcomes. Also needed: supply chain transparency, more local manufacturing, and vocal support for companies investing in a sustainable future. “Keeping toilet paper stocked on supermarket shelves is going to feel like a cake walk compared to what is coming, as we start experiencing food shortages, droughts and mass migrations from climate-driven weather extremes.”
- Read the full post.
Agents of Impact: Follow the Talent
ImpactAlpha partner event: U.S. Commerce Secretary Gina Raimondo will host the Biden administration’s first Interagency Convening on Equitable Economic Growth, with White House domestic policy advisor Susan Rice, Securities and Exchange Commission chair Gary Gensler, Atlanta mayor Keisha Lance Bottoms and other officials. Collaborating on today’s event are the Ford Foundation, the U.S. Impact Investing Alliance, B Lab, Families and Workers Fund and Ariel Investments. “Today is a call to action for coordinated and bold leadership across sectors,” said the Alliance’s Fran Seegull. Tune in today at 8:30am ET.
Carletta Ooton, ex- of Amazon, joins Apollo as head of ESG for private equity… Schneider Electric is hiring an environmental specialist in the U.K… RE Sources is looking for a finance director in Bellingham, Wash…. Boston Impact Initiative seeks a field-building program manager in Boston… Kensington Corridor Trust is looking for a community organizer in Philadelphia… East Bay Community Foundation is hiring a grants and scholarship manager in Oakland… End Citizens United is looking for a finance and compliance intern in Washington, D.C.
Thank you for your impact.
–Nov 9, 2021