The Brief: Ins and outs of digitalizing small businesses in emerging markets

Greetings Agents of Impact! Wishing you a May Day filled with sunshine and flowers. It was great to see so many of you on yesterday’s Call, “Writing the playbook for shared prosperity.” We’ll have a recap and replay in Friday’s Brief. Add your favorite play – or your own. 

⚡ PluggedIn: Building equity for underinvested business owners. Shared equity strategies can help low-wealth business owners buy the commercial properties where they operate. The appreciating asset value can build generational wealth or be leveraged for growth capital. The wealth-building strategy “leverages capital to uplift, not extract,” says Napoleon Wallace, a co-founder of Partners in Equity, which provides such downpayment assistance. Partners in Equity’s Talib Graves-Manns and Wilson Lester join ImpactAlpha’s Sherrell Dorsey to discuss how they are channeling capital to foster Black entrepreneurship, and build equity for empowerment and resilience. Tuesday, May 6 at 10am PT / 1pm ET / 6pm London. RSVP now.

In today’s Brief:

• Digialtizing small businesses in Delhi, Lagos, Addis Ababa, Jakarta and São Paulo
• Pay-as-you-go solar defaults
• Ford, Sorenson and Surdna join the Catalytic Capital Consortium
• Canada’s outperforming impact investments

Featured: Financial Inclusion

How digitalization is – and isn’t – helping informal and small businesses in emerging markets. The Covid pandemic spurred a mad dash to keep informal and small businesses afloat with digital technology and enterprise software. To prove such businesses were not only eager, but reliable, customers, tech startups rolled out inventory ordering and business accounting apps, digital payments, logistics management, and credit products. Billions of dollars in venture capital investment poured in to support the tools’ adoption and the startups’ growth (see, “Riding the digital transformation to drive inclusive and sustainable growth”). Is it working? A survey of 4,000 informal and small businesses in Delhi, Lagos, Addis Ababa, Jakarta and São Paulo suggests that “digital tools can help local low-income businesses survive climate shocks, economic disruptions and rising trade barriers,” says Edoardo Totolo of Accion’s Center for Financial Inclusion. The caveat: “Many of these platforms remain ill-suited to the realities of low-margin enterprises,” says Totolo, who co-authored the study, “Small firms, big impact.” 

• Business continuity. Widespread mobile phone adoption means a majority of small businesses have access to some digital tools. But whereas most tech providers are designing products to support businesses’ growth, business owners are more concerned about continuity and stability. Only about 10% say new tech tools have led to revenue growth. What is needed are better and more accessible insurance and savings products, for example, and guardrails and protections for digital payments, states the report. Low-income consumers and business owners are disproportionately hit by fraud and hidden fees. Digitalization tools, without proper guardrails, risk exacerbating financial insecurity and exclusion, “leading to devastating losses for small businesses already operating on the brink,” writes Totolo in a guest post for ImpactAlpha. “Products and services designed to support small businesses must prioritize building resilience and stability, avoiding one-size-fits-all solutions centered solely on expansion.” Read his full piece.
  
• Digital payments. Use of digital tools varies greatly across gender, age, business experience and geography. Education level is the “strongest and most consistent predictor of technology adoption across all cities,” finds the survey. “Owners with a higher education level use significantly more digital technologies.” Digital payments is the most widely adopted tool and is almost universally used in São Paulo and Delhi. E-commerce platforms took off in the pandemic, but few informal and small businesses use them; the highest rates of e-commerce adoption are just 12% in São Paulo and 7% in Jakarta. Female entrepreneurs trail their male colleagues in digitalization, particularly in Addis Ababa and Lagos. A key reason for slow adoption of business digitalization tools is business owners’ concerns about transparency and security.
  
• Keep reading, “How digitalization is – and isn’t – helping informal and small businesses in emerging markets,” by Jessica Pothering on ImpactAlpha.

Defaults on pay-as-you-go solar tick up with income pressure and financial literacy challenges. Most off-grid solar customers pay cash up front for their products. But among those buying on credit, defaults are on the rise. “Falling behind: Defaulted customers,” a new study of the pay-as-you-go solar sector by 60 Decibels aims to illuminate the challenges and risks of lending to new financial customers. About 40% of pay-as-you-go solar customers who had defaulted on their loans did so because of income irregularity, according to the survey of 1,400 customers at 11 off-grid solar providers. Customers living below the poverty line are less likely to default than slightly wealthier households. “This may be because people living in poverty are having to make harder financial decisions to sign up for consumer financing and are more committed to making it work,” the report finds. About 30% of borrowers say they didn’t fully understand their payment terms. “Companies have to make sure that they are fully explaining what this kind of financing means and what their responsibilities to the customer are,” 60 Decibels’ Kat Harrison tells ImpactAlpha.

• Keep reading, “Defaults on pay-as-you-go solar tick up with income pressure and financial literacy challenges,” by Lucy Ngige on ImpactAlpha.

Dealflow: Green Bonds

Nepal’s first green bond launches with $60 million from BII, IFC and MetLife. NMB Bank launched the country’s first green bond with $60 million from the International Finance Corp., British International Investment and life insurance company MetLife. The IFC anchored the deal with a commitment of up to $50 million in local currency financing last year. According to BII, the green bond is a first for international investors supporting a locally issued bond in a private deal. The bond’s proceeds will fund green projects like solar and clean transport, with the aim of creating 8,000 jobs.

• Green bond expansion. Overall sustainable bond issuance in the Asia-Pacific region is expected to reach $260 billion this year, up from $246 billion last year. Green bonds in particular are gaining traction, especially in major markets like Japan, India and China, as well as Thailand, Malaysia and Indonesia. The Bank of the Philippine Islands is planning to launch a green bond next month to raise five billion pesos ($87.2 million) for renewable energy and water and sanitation projects. Separately, BII has issued two “green basket bonds” to support small business lenders in funding small-scale green projects in Asia and Africa. 

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Growers Edge clinches $25 million to help agrifood retailers and lenders adopt climate-smart practices. The Iowa-based fintech startup helps agrifood retailers, lenders and growers offset financial risks in adopting sustainable practices. The digital toolkit includes a crop warranty plan that compensates growers in case their output falls short during their transition to climate-friendly practices. A farm mortgage-financing tool uses land valuation to help lenders originate and disburse loans more quickly. “Farmers want what’s best for their land. But too often, the risk of trying something new means sticking with business as usual,” said Eric Helfgott of Lowercarbon Capital, which co-led the financing round with S2G Investments and Cibus Capital, a London-based food and agriculture investment firm. 

• Agrifood investing. Growers Edge partners with Mondelez International, PepsiCo and other large retailers to drive regenerative agriculture practices. The company will use the new capital to expand in the US. Growers Edge’s crop plan warranty covers one million acres of farmland, and the company’s farmland valuation tool covers over 144 million acres. The company acquired Agcor late last year to factor weather and climate-related risks into its farmland valuation tool. Other investors in the new round include Otter Creek, iSelect Fund and activist investor Jeff Ubben.
  
• Check it out. 

Ford, Sorenson Impact and Surdna foundations join the Catalytic Capital Consortium. The foundations are the latest funders to join C3, an initiative launched in 2019 by the MacArthur and Rockefeller foundations and Omidyar Network. The funding consortium aims to deepen collaboration among investors deploying patient, flexible and risk-taking capital to crowd in commercial investors to strategies that address key social and environmental issues. Last year, seven other funders joined the consortium, including family offices Blue Haven Initiative, Builders Vision and Ceniarth (listen to their SOCAP panel discussion, moderated by ImpactAlpha’s David Bank). The new commitments to C3 bring total funding in the current phase to $6 million. (Disclosure: The Ford and Sorenson Impact foundations are investors in ImpactAlpha; C3 sponsors ImpactAlpha’s catalytic capital coverage.)

• Market building. Earlier C3 funding helped research capital gaps, build tools and showcase solutions. Ford’s Roy Swan says the foundation’s decision to join C3 “aligns with our belief in the transformative power of capital to create systems change.” Catalytic capital, says Swan, “is essential to build stronger economies that uplift underserved communities from the heartland of America to the Global South.”
  
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Dealflow overflow. Investment news crossing our desks:

• UK-based Pioneer Point Partners raised €1.1 billion ($1.3 billion) for its second sustainable infrastructure fund from pension funds, insurance companies, endowments and foundations in Europe and North America. (Pioneer Point Partners)
  
• The United Arab Emirates’ $30 billion Alterra climate fund made a $100 million co-investment, alongside Brookfield Asset Management, in Indian renewable energy company Evren to develop 11-gigawatts of solar, wind and battery storage (see, “Anchored by Altérra, TPG and Brookfield raise billions for climate opportunities in emerging markets”). (Alterra)
  
• New Jersey-based Queens Carbon snagged $10 million of seed financing from Clean Energy Ventures, Plug and Play, Clean Energy Venture Group and other investors for its low-carbon cement. (Queens Carbon)
  
• Upstart Co-Lab’s Inclusive Creative Economy Strategy invested $500,000 in Breakr, a Black-led creator marketing platform in the US. Also on Breakr’s investor roster: Andreessen Horowitz’s TxO Fund, Live Nation, Slow Ventures and Marc Benioff.

Signals: O Canada!

In Canada, most impact investments are outperforming. Two-thirds of investments in Canada’s burgeoning impact investing marketplace are notching returns at or above market rates. That’s according to the “Canadian impact investing market performance report,” an SVX survey and analysis of 264 debt and equity instruments on its SVX Impact Index, a national database of investment offerings available to Canadian investors. The survey “provides proof that impact investing is a viable strategy for investors,” says SVX’s Adam Spence. “During a period of volatility, we believe more investors will be seeking a balanced investment strategy generating positive local and global impact and solid financial returns.” Among the newest additions to SVX Impact Index are Renewal Funds’ Renewal5 venture fund, Migr8 Capital’s first fund for growth startups led by immigrants, and Harvest Impact’s Community Lending Fund for companies in the circular economy.

• Impact tailwinds. Canadian impact investing could find fresh tailwinds after the rapid ascent of Mark Carney, the former chief of the Bank of England and chair of Brookfield Asset Management, who earlier this week won a full term as Canada’s prime minister (see, “Canada puts a green banker in charge of its response to Trump”). As head of the Financial Stability Board, Carney spearheaded the Task Force on Climate-Related Financial Disclosure, or TCFD, and led efforts by central banks to identify climate-related risks. At Brookfield, Carney led the firm’s energy transition investments, helping to raise $15 billion for the firm’s first Global Transition Fund. In one of his first moves as prime minister, Carney scrapped an unpopular carbon tax on consumers. Among his climate plans for Canada are carbon pricing for polluting industries and subsidies for electric vehicles and home upgrades.
  
• Prosperity pathways. Investments that deliver strong returns, alongside social and environmental impact, could also get a boost as Canadians search for pathways to shared prosperity and national sovereignty amid attacks from US President Donald Trump. Canadian leaders are touting employee ownership as one such strategy (see, “Hands off: Investing in employee ownership can ensure Canadian businesses stay Canadian”). Canada passed legislation last year to expand the use of employee ownership trusts with a goal of transitioning 10% all Canadian businesses to employee ownership by 2030. The government’s C$755 million (US$546 million) Social Finance Fund, launched in 2023, makes repayable investment capital available to nonprofits, social enterprises, cooperatives and other social purpose organizations.
  
• Keep reading, “In Canada, most impact investments are outperforming,” by Dennis Price on ImpactAlpha.

Agents of Impact: Follow the Talent

CapShift promotes Liz Sessler to president and chief operating officer… Montauk Climate taps Matt Bisgyer, previously with Energy Impact Partners, as principal… Spring Point Partners is looking for a finance senior director in Philadelphia… Closed Loop Partners seeks a private equity associate and a senior program manager for its Center for the Circular Economy.

New Majority Capital has an opening for a deal analyst, a business development and lending specialist and a quality of earnings manager… Echoing Green is looking for an events and engagements associate and a communications associate… Pacific Community Ventures is recruiting a business advising associate, a SBA microlending credit analyst and a climate lending associate director.

Mission Investors Exchange’s Mission Investing Institute, will bring together foundation professionals for hands-on training in values-aligned investing, May 5–7 in Atlanta… 2X Global and Toniic are co-hosting, “Investing in women and girls: Beyond the basics,” with EQT Group’s Jen Braswell, Eva Yazhari of Beyond Capital Partners, and Blue Have Initiative’s Lauren Rosales Farello, Monday, May 12… ODI Global launches the Center for Private Finance in Development, a new research and policy hub seeking to unlock private capital for sustainable development.

👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.

Thank you for your impact!

– May 1, 2025