INCLUSIVE FINANCE

Challenges:

Globally, c. 1.7 billion adults are unbanked and have no access to formal financial services. As a result, they are unable to take advantage of basic economic tools such as savings, credit, money transfers or insurance. This leaves them vulnerable to shocks such as job losses or unsuccessful harvests.

Investment themes and strategies:

Microfinance:

support MFIs in underserved areas that provide small loans to individuals and informal businesses to further penetrate underserved segments and markets.

Specialty financial services:

pensions, savings, investment and insurance services allow low-income individuals in emerging markets to mitigate the risk of income shocks and shortfalls that could otherwise push them into extreme poverty.

Fintech:

application of technology to traditional business models (e.g. digitalization of MFIs, online remittances, personal finance) and development of new technologies. These new models can help broaden the access to financial services and reduce transaction cost.

HEALTHCARE

Challenges:

In the last 20 years, chronic diseases have surged from 4 to 7 of the world’s top 10 causes of death. Diabetes, kidney disease and dementia add to the burden from heart disease and stroke. Developing countries are increasingly affected: over half of the related rise of two million annual heart disease deaths were in Asia-Pacific.

Many lives and much expense can be saved with early access to diagnostics, preventive care or primary health services, or managed through cost-effective outpatient treatment, including innovative remote care models. Yet, according to the WHO, less than half of the world’s population lacks access to essential healthcare services.

Investment themes and strategies:

Healthcare services:

increase access, quality and cost by focusing on scalable, localized and affordable care delivery models including primary care networks, outpatient specialty care and ancillary healthcare services.

Preventive and chronic care:

innovative physical, digital and blended care models and diagnostics to address rising chronic health incidence and related gap in non-institutional, personalized treatment modalities.

Pharmaceutical and medical supplies:

increase healthcare supply chain resilience by scaling local and regional manufacturing and distribution.

EDUCATION

Challenges:

The progress towards inclusive and equitable education is slow. Over 200 million children are expected to be dropped out of school in 2030. In low-income countries, the school completion rate is 34% in the poorest 20% of households vs. 79% in the richest 20% of households.

Adequate infrastructure and teacher training are critical for quality of education. In developing countries, schools often lack basic resources, such as consistent electricity. Across Sub-Saharan Africa, under 50% of schools have access to computers and internet. Only 65% of primary schools have basic handwashing facilities

Investment themes and strategies:

School financing:

provide financial resources to schools to offer basic resources and high-quality education to its students at affordable prices.

Vocational training:

increase employability of low skilled workers by teaching job-relevant skills.

Online education:

leverage technology to provide and broaden access to quality education at affordable prices.

Education financing:

Increase access to higher education to low-income populations through affordable student loans.

HOUSING

Challenges:

c. 1.6 billion people live in inadequate housing. c. 24% of the urban population lives in slums and informal settlements. The COVID-19 pandemic has hit the hardest the more than one billion slum dwellers, who lack adequate housing, do not have running water at home, share toilets and few or no waste management systems.

The need for decent housing is especially strong in emerging markets, where 834 million live in slums. Affordable housing also remains a challenge in advanced economies: 60 million households are financially stretched by housing costs across the United States, the European Union, Japan and Australia. In the United Kingdom, over one million households are on waiting lists for government-subsidized housing.

Investment themes and strategies:

Housing development:

increase the supply of affordable and quality housing for previously underserved market segments by building new properties (greenfield) or converting existing properties (brownfield) to decent affordable accommodation – supporting sale, rental and rent-to-own schemes as well as development models that provide community infrastructure and development opportunities beyond housing.

Housing finance:

inclusive specialized finance institutions providing mortgages to low-income people and key workers – affordable housing non-bank financial corporations are developing strongly in markets such as India and Cambodia.

ENERGY ACCESS

Challenges:

Globally, c. 789 million people – 85% in rural areas – still lack access to electricity. There is also a chronic shortage of affordable and reliable energy, with one in four health facilities not electrified in some developing countries.

Investment themes and strategies:

Solar lights:

affordable clean lighting solutions, with daily financing payments below the displaced cost of kerosene, resulting in increased savings, positive health effects and improved environmental outcomes.

Solar household systems:

affordable clean energy access solutions with low upfront costs and medium-term financing.

Mini-grids:

decentralized, off-grid community-level clean energy solutions.

Clean cooking:

affordable clean-burning cook-stoves with significantly lower charcoal / firewood consumption, fuel and indoor pollution which ranks fourth among serious threat to health.

FOOD & AGRICULTURE

Challenges:

c. 26.4% of the global population is affected by moderate or severe food insecurity. c. 144 million children under five are stunted. An efficient agriculture sector is essential to reducing hunger and improving food security, as well as increasing resilience to disasters and shocks. However, government spending on agriculture relative to its share of GDP fell by over 33% between 2001 and 2018, thereby increasing the need for private investment.

Small-scale farmers comprise c. 40-85% of food producers in emerging markets. They face difficulties growing enough food to feed their families and lack access to know-how, capital, market access and storage. They face significant yield gaps, realizing c. 20% of their theoretical potential (vs. 80% in the developed world).

Investment themes and strategies:

Fair trade, supply chain and ethical consumer brands:

strengthen the value chain for smallholder farmers, through fair trade and ethical brands that drive demand for sustainable and ethically sourced food products, which allow smallholder farmers to achieve higher prices and yields.

Agri-business:

invest in inclusive agri-businesses that provide transparency and income stability to smallholder farmers and help reduce the yield gap through know-how transfer, education and provision of inputs, such as seeds and nutrients. Efficiently run agri-businesses can lower resource intensiveness, reduce food waste and promote regional trade.

JOB CREATION

Challenges:

Globally, c. 90% of businesses and 50% of employment comes from micro, small and medium enterprises (“MSMEs”). They are a vital contributor in job creation, innovation and economic development, accounting for c. 70-95% of new employment opportunities in emerging economies.
Access to finance is a key challenge: over 40% of formal MSMEs in developing countries lack access to external financing and this number is significantly higher when informal MSMEs are included. The unmet financing demand of these MSMEs is c. USD 5.2 trillion a year – c. 1.4x the current level of the global MSME lending.

Investment themes and strategies:

Small and medium enterprise lending:

providing working capital, expansion capital and more traditional corporate lending solutions to 130 million MSMEs who are not serviced by financial institutions.

Fintech:

by drawing on technology developments, financial technology institutions can offer solutions that are efficient and effective at a lower scale, especially when compared to traditional banking institutions.

Merchant cash advance:

providing retailers with a flexible and scalable form of financing with repayments made as a percentage of revenue. This allows retailers with few assets and limited credit history gain access to capital.

PROTECT THE ENVIRONMENT

With our social impact investments, we are committed to improving the living conditions of underserved people by facilitating job creation and increasing access to goods and services to support economic and social development. However, we recognize that investing for social outcomes may sometimes conflict with preserving the environment, as some investment activities inevitably generate greenhouse gas (GHG) emissions.

We track the carbon footprint of all our direct investments and aim for our social impact funds to be carbon neutral. We collect greenhouse gas related data following the GHG Protocol guidelines on three scopes of emissions, an industry best practice, with customizations based on the portfolio. Data reported include total tCO2e emissions, fuel and electricity consumption data, and emissions from financed activities.

TUGENDE

Tugende provides lease to own financing for boda-bodas (motorbikes taxi) drivers. This gives drivers an opportunity own an income generating asset for the first time in his or her life, the first step to improving his or her livelihood. Since inception, the business has helped finance over 43,000 boda bodas.

GOODLIFE

Goodlife is East Africa’s leading pharmacy chain. In areas with poor healthcare provision, difficulties with availability and affordability lead low-income people to informal pharmacies with unethical sales practices and often counterfeit products. Goodlife increases access to affordable high-quality drugs from certified manufacturers and employs qualified and trained staff to give medical advice to underserved consumers.

VARTHANA

Varthana is a leading non-bank financing company that lends specifically to affordable private schools, with a mission to increase access to quality education in low-income communities. Schools use loan proceeds to expand infrastructure, invest in teacher training and introduce new learning methods into classrooms. Over the past few years, Varthana has provided financial loans to over 5,900 affordable private schools all across India.

INTERNATIONAL HOSING SOLUTIONS

IHS Fund II SA is a specialist real estate fund, managed by International Housing Solutions, that delivers affordable green housing for lower- and middle-income families in South Africa, aiming to reduce the number of families living in slums or informal housing and improve access to employment, education, health, security and wealth.

GREENLIGHT PLANET

Greenlight Planet delivers affordable energy by designing, distributing and financing small scale solar home products to the world’s one billion under-electrified consumers. Since inception, Greenlight Planet has electrified over 10.7 million households around the globe.

SHARED-X

Shared-X produces and commercializes specialty and organic crops alongside smallholder farmers using regenerative agricultural practices. Under this Impact Farming model, smallholders have access to modern technologies and premium international markets. Resulting in significantly higher yields and greater household income, improving the livelihoods of underserved communities in the regions where the company operates.