CDC’s shareholder, the UK’s Department for International Development (DFID) is developing new ways to foster the market for impact investment in Africa and South Asia. As part of this, DFID has established a new £75m impact investment Fund that is managed by CDC under different principles to those that underpin CDC’s usual investment approach. CDC’s investment strategy has two objectives, each with independent minimum standards. We must generate reasonable financial returns and also must achieve strong development impact (defined as creating jobs, directly and indirectly).
Launched in December 2012, the DFID Impact Fund will invest in impact investment intermediaries that provide capital to businesses and projects improving the lives of poor people in sub-Saharan Africa and South Asia. Backed by expert technical assistance, the Fund is designed to attract new investors to promising impact investment intermediaries.
In early 2013, CDC opened a ‘Request for Proposals’ process and received over 100 proposals from fund managers, holding companies, non-profit organisations and other investors. This process is now closed and CDC is assessing the proposals and undertaking due diligence to determine which proposals will be selected for funding.
Key details of the Fund
- The DFID Impact Fund will be focused on investments in low income and lower-middle income countries in sub-Saharan Africa and South Asia with a maximum of 15% of capital available for investing in India through a regional or a global intermediary. The Fund capital cannot be invested through an intermediary focused on investing only in India.
- The DFID Impact Fund will be invested through vehicles that have a clear strategy to invest in businesses that have a positive impact on the ‘bottom of the pyramid’ population as consumers, producers or workers.
- The Fund aims to direct investment capital towards sectors or pro-poor businesses that are otherwise unable to attract commercial investment and hence require the early-stage patient capital and technical support available through the Fund. The DFID Impact Fund is open to supporting investment in all sectors where a Fund can demonstrate significant unmet need for investment to achieve impact. These include, but are not limited to, businesses providing access to food, housing, energy, water, sanitation, health, education, financial services and livelihoods for the people at the bottom of the pyramid.
- Funds which have a potential to invest in sectors or enterprises that target poor women and girls as suppliers, producers or consumers of essential goods or businesses for the poor in post-conflict countries are particularly welcome to apply.
- Note that as microfinance has successfully attracted investment capital from other sources, we have chosen to exclude microfinance-focused investment vehicles from the purview of the Fund.
The Fund’s investments aim to:
- reach over 5 million poor women and men who would benefit from access to affordable goods and services such as health, agricultural services, food, energy, housing, education, and safe water, and to new opportunities as employees or producers.
- provide investment to over 100 enterprises in sub-Saharan Africa and South Asia
- ensure additional private capital is invested alongside the DFID Impact Fund capital.
What’s different about the DFID Impact Fund?
The DFID Impact Fund will operate under different principles to those that underpin CDC’s usual investment approach. Under its current strategy, CDC’s focus is typically on investments that provide both reasonable commercial returns and the opportunity to grow businesses and create jobs, directly and indirectly.
The DFID Impact Fund, however, is investing on an impact-first basis, whereby the investments will be focused on backing businesses that achieve positive impact specifically on the poorer sections of the population, either as consumers, producers or workers.
Unlike CDC’s usual investments, the DFID Impact Fund has no set target for returns, but will at least expect to have its capital returned upon exit.
Find out more
Further information on the DFID Impact Fund (external link)