Asia | August 6, 2018

Youth, tech and entrepreneurship drive impact investing’s growth in Southeast Asia

Dennis Price
ImpactAlpha Editor

Dennis Price

Southeast Asia’s mix of democracies, military dictatorships and communist governments, alongside economies at various levels of development present a challenge for regional investment strategies. A tech-connected and youthful population with a growing affinity for entrepreneurship, however, make it an emerging hotspot for impact investing.

About 60 impact investors have placed about $900 million into 225 direct deals in the region over the last decade, with about 80% of capital deployed in the last five years, according to The Landscape for Impact Investing in Southeast Asia, the latest regional report from the Global Impact Investing Network. About a dozen development finance institutions, but mostly the International Finance Corp, have invested more than ten times that amount through about 289 direct deals.

  • Concentrated capital. Cambodia, with robust microfinance sector, has attracted about $400 million from private impact investors. That’s more than Indonesia, the Philippines, and Vietnam combined. Indonesia, Philippines and Thailand have attracted two-thirds of development finance.
  • Inclusion, basic services and jobs. Financial services, energy, and manufacturing have captured 82% of total impact investment capital in Southeast Asia.
  • Missing middle. Deals under a half a million are rare in Southeast Asia. Most investors lack a local presence, which increases the cost of sourcing deals and pushes investors toward larger, later-stage deals.
  • ImpactAlpha dealflow. In March, Impact Terra raised $3 million in grant capital to provide ag data to Myanmar farmers. In June, Filipino billionaire John Gokongwei and fintech startup Oriente committed $200 million to Cashalo, which uses non-traditional credit scoring methods make loans to individuals. Last week, Insitor Impact Asia Fund, a Phnom Penh-based impact investor, backed SolarHome to expand across Myanmar and into Cambodia and Indonesia by year’s end.

Moving capital with a gender lens has the potential to unlock underserved market and additional social impacts, says Julia Newton-Howes of Investing in Women, an Australian government initiative pushing gender-lens investing in the region, (See, “Australia’s bet on women entrepreneurs in Southeast Asia”). Five private impact investors with an explicit gender-lens have made about 30 deals totaling $40 million. “Impact investing will not reach its full potential without incorporating an intentional gender lens.”