MICROCAPITAL PUBLICATION ROUND-UP: Improving the Wellbeing of the Poorest of the Poor; Finance in Motion’s Impact Investment Report; Investing in Africa’s Small, Growing Businesses

“A multifaceted program causes lasting progress for the very poor: Evidence from six countries;” published by American Association for the Advancement of Science (AAAS), 2015-05, available at http://dspace.mit.edu/handle/1721.1/97047

This study reports that a multifaceted “graduation” program generated improvements in the wellbeing of the “poorest of the poor.” The program provides families with a free productive asset, such as a cow or sowing machine, for instance; training and support; life skills coaching; temporary cash grants; access to savings accounts; and health services. The study included six randomized trials, one each in Ethiopia, Ghana, Honduras, India, Pakistan and Peru, with a total of 10,495 participants. In each site, the implementing partners identify the poorest of the poor in villages associated with extreme poverty through a “participatory wealth-ranking process.” The researchers note statistically significant improvements among the treatment group in all six trial sites across eight of ten indicators: consumption (food, nonfood, and durable good), food security, assets, financial inclusion, time use, income and revenues, mental health, and women’s empowerment. The two indicators for which there were not statistically significant impacts were physical health and political involvement. Although a “multipronged approach is relatively expensive,” the authors conclude that the “estimated benefits are higher than the cost in five out of six sites,” and thus “a multifaceted approach to increasing income and well-being for the ultrapoor is sustainable and cost-effective.”

“Generating Returns Through Development Finance; 2014 Impact Investment Report,” by multiple authors, published by Finance in Motion GmbH, April 2015, 37 pages, available at http://www.finance-in-motion.com/media/public/pdf/press/downloads/fim_impact_investment_report_2014.pdf

This report includes an overview of the market for impact investments as well as the financial performance of Finance in Motion’s four active funds, European Fund for Southeast Europe (EFSE); Green for Growth Fund, Southeast Europe (GGF); Sanad Fund for MSME (micro-, small and medium-enterprises); and Eco.Business Fund. The authors also outline a framework for creating impact “while securing investments,” which includes assessing the eligibility of a prospective investee or partner institution, conducting intensive due diligence, structuring the investment, and reviewing it via an internal risk committee. Between its four funds, Finance in Motion manages EUR 1.46 billion (US 1.59 billion).

“Investing in Africa’s Small and Growing Businesses”, by Loic Sadoulet, Kim Wilkinson, Randall Kempner, Jenny Everett and others, published by Investisseurs & Partenaires (I&P), May 2015, 66 pages, available at http://financerlespmeenafrique.com/wp-content/uploads/2015/05/Handbook-Investing-in-Africas-SGBs.pdf

This handbook, designed in partnership with Ernst & Young, the Aspen Network of Development Entrepreneurs and the business school Insead, is designed for investors and entrepreneurs with the objective of fostering investment in small and medium-sized enterprises (SMEs) in Africa. The report incorporates lessons learned by six investors as well as contributions from ten African entrepreneurs. The authors conclude that “equity investment can efficiently meet the three main needs of African Small and Growing Businesses (SGBs): access to long-term risk finance, access to skills and improvement of governance standards.” The handbook also outlines private equity investments as a potential solution for African SGBs, steps to investing, and supporting and exiting private equity investments in Africa.

By Mathew Cerf, Research Associate

Sources and Additional Resources

[1] Finance in Motion, “Generating Returns through Development Finance; 2014 Impact Investment Report” http://www.finance-in-motion.com/media/public/pdf/press/downloads/fim_impact_investment_report_2014.pdf

[2] Investisseurs & Partenaires, “Investing in Africa’s Small and Growing Businesses” http://financerlespmeenafrique.com/wp-content/uploads/2015/05/Handbook-Investing-in-Africas-SGBs.pdf

[3] Science Magazine, “A multifaceted program causes lasting progress for the very poor: Evidence from six countries” http://www.sciencemag.org/content/348/6236/1260799

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