© Khumaer.us
Impact investing and blended finance are a key tool to unlocking Pan-African markets and sustainable development.
Since 2010, PIND Foundation has strengthened and stabilized Niger Delta communities by reducing poverty, powering coastline communities, nurturing employment, fostering stability, and enabling development through multi-stakeholder partnerships. Recently, PIND has been exploring impact investing models to ensure the long-term sustainability of its programs in the Niger Delta region of Nigeria, including the role philanthropy can play in shaping it. Ese Emerhi spoke with Aline Varre, PIND’s Director of Strategy & Business Development, on what this journey has been like so far.
Ese Emerhi: Can you tell me a bit more about why PIND made the shift to impact investing? Was this driven by the need to wean itself from its corporate and sole donor?
Aline Varre, Director of Strategy & Business Development, PIND Foundation
Aline Varre: The conversations around this began about three years ago, and technically, it’s not a shift per se but an added solution for scaling. We were exploring how to achieve a sustainable strategy for PIND. Additionally, it involved seeking a path to reduce our dependency on just one donor and to start diversifying our funding portfolio. At that time, the world of impact investing was beginning to take shape, and snippets of it could be heard at conferences, meetings with government officials, and within the private sector. We embarked on this journey by partnering with two organizations – Cross-Boundary Advisories and Total Impact Capital – to help us think through the question of how to leverage our portfolio of programs in a way that drives investment and sustainability. The blended finance strategy we developed involved designing a special purpose vehicle (SPV) to absorb capital for SMEs we’ve already worked with in the Niger Delta, focusing on three verticals – access to energy, agriculture, and youth entrepreneurship and empowerment. This would serve as a blended finance tool to attract investments to the region and support these SMEs that would otherwise struggle to access capital in the regular market due to extremely high interest rates.
As you referenced earlier, the field of impact investing is relatively new, maybe less than 15 years old. Why is it important for NGOs and corporate entities to have a social impact strategy, and what benefits are there in engaging with it? Perhaps, more critically, what do you see as the role of philanthropy in this?
Not one sector or industry can reach the Sustainable Development Goals alone. The COVID-19 pandemic restructured, in many ways, how capital is now being deployed. For private sector businesses, the lens through which they look at investing means seeing things by analysing a company’s sustainability through profits and the impacts that could come from that through its environmental and social governance factors (ESG). This could mean that for certain industries or sectors, there’s an automatic blackout where the risk is too high, and private-sector businesses simply don’t invest in these industries. But with impact investing and venture philanthropy, you start with doing good first, and the investment comes in second.
The challenge is that the private sector has the capital but lacks the on-the-ground data, and that’s where philanthropy plays a crucial role. Additionally, the government has limited capacity to reach these communities effectively. Philanthropy’s strength lies in its ability to work in remote areas and gather data, having spent years building trust with these communities. Philanthropy must step up to be the resource, the missing puzzle piece that will help us achieve the Goals of 2030. It can serve as the bridge between communities and the private sector, enabling dialogue about how development can occur, the types of investments needed, and their locations.
With that said, philanthropy must make some adjustments of its own. We tend to view grantmaking as the sole solution to on-the-ground problems. This process of writing proposals, waiting for grant approval, receiving funds, allocating budgets, implementing projects as dictated by the donor, and reporting on outcomes—this old model cannot drive sustainable development. This outdated process means there’s no revenue and no return on investments. We must remember that grants are meant to catalyse development, not sustain it. Philanthropy needs to be innovatively flexible and embrace risk. This task is not easy, especially when entering new areas where precise data may be lacking. It also requires a great deal of patience. The message philanthropy can convey to the private sector is that doing good is good for business. Philanthropy is a crucial link between the private sector, government, and communities. At PIND, we’ve gone the route of blended finance as a new innovative tool to address some of the challenges in communities.
Why did PIND choose the blended finance model approach?
The blended finance approach represents an advancement over traditional grantmaking. It aims to reduce the risks associated with investments from private capital, both reputationally and financially. We employ catalytic capital alongside commercial banks to lower interest rates on loans to SMEs, making loan repayment more manageable. This approach, for example, could reduce the market rate in Nigeria from 32 percent to approximately 25 percent. In many respects, the Special Purpose Vehicle (SPV) model we are developing fosters an environment where businesses can prosper, and smallholder farmers and solar developers can access capital for economic development.
How can an NGOs shift their operating model to get into the blended finance or impact investing space? Perhaps another way to ask the question is, should NGOs start thinking more like businesses?
I believe that shifting from a purely nonprofit mindset to a social entrepreneurship perspective is what will enable philanthropy to be included in the discussion of sustainable change. This shift means being able to communicate in different ‘languages’—to reassure the private sector that their investments are secure, to engage with governments to create policies that foster an enabling environment, and to inspire NGOs and other philanthropic institutions to adopt the spirit of social entrepreneurship in their operations to enhance sustainability. Achieving this requires intentional and effective change management, along with a touch of courage. The current system is often siloed, and so this forces us to think differently and innovate. Yesterday’s solutions cannot address today’s challenges.
We also need to begin collaborating across sectors and rethink how we approach hiring. Consider hiring finance directors or associates from the banking sector or businesses, and bringing in communications professionals from the private sector, among others.
There are many examples of alternative and emerging approaches, from community philanthropy to participatory grantmaking. How do you go about the process of change-making?
I once heard a quote from Frank Aswani, the CEO of the African Venture Philanthropy Alliance. He stated that for the field of impact investing to succeed, one must fall in love with the problem, not the solution. Personally, as a Senegalese, I have developed a deep passion for the issues facing the Niger Delta in Nigeria over the past decade; this dedication is why I am still here. Nigeria’s challenges are the continent’s challenges. By addressing Nigeria’s problems, we can also tackle issues across Africa. If you focus on the problems in Nigeria and remain innovatively flexible in your approach, you will unlock solutions that can be applied throughout the continent.
What would you say PIND’s success has been in this new pathway?
We’ve made significant progress in the industry. We’ve leveraged our more than a decade of experience in the Niger Delta to stimulate private-sector investment in the region. We’ve demonstrated the courage to step out and try something new, using our extensive network to bring in new players. However, it’s only been a three-year journey into impact investing for us, so there’s still much work ahead. I’m encouraged by the fact that many global financial institutions are looking to invest in social impact programming with organizations like ours and others. I am very proud to be part of a team that has ventured out and taken the risk.
What key messages or calls to action do you want to leave with the philanthropic community?
My call to action is for philanthropies worldwide to step up and take risks, trusting that by positioning ourselves this way, though uncertain, we can put the communities we work with, especially in Africa, on a path to sustainable development. I invite philanthropy to engage in a space where you fall in love with the problem so that you can discover the solution. Leap out on faith and be innovative; embrace new strategies for the ever-changing and evolving challenges. The truth is, we already have this in our DNA: philanthropies pilot programs, conduct research, partner with similar and dissimilar institutions, ask questions, and more. We just need to do more of it. We can be the puzzle piece that the impact investing space has been missing.
Ese Emerhi is Alliance regional representative for West Africa and Global Network Weaver at the Global Fund for Community Foundations.
Images are for reference only.Images and contents gathered automatic from google or 3rd party sources.All rights on the images and contents are with their legal original owners.
Aggregated From –
