The Truth About Disruptive Development


The West shouldn’t create solutions to problems we don’t understand using fashionable mobile technologies.

By Ken Banks10 | Jan. 16, 2013


Mobile users in developing countries are increasingly using apps and services developed in-country. (Photo by Ken Banks)

Ten years ago, I was preparing for my first contribution to mobile technology—the result of two years of work that would lead to the development of a conservation service called wildlive!, and which would mark the release of one of the earliest reports on the application of mobile technology in conservation and development. A lot has happened since then. There’s been an explosive interest and excitement—and, yes, hype—in mobile, and a sense that the technology can be the savior of, well, everything.

Back in 2003, you’d be able to fit everyone working in mobile for development (m4d) into a small cafe. Today you’d need at least a football stadium. m4d—and its big brother, ICT4D (information communication technologies for development)—have become big business. Although I didn’t need more proof of mobile’s supreme status in development, last month I attended Vodafone’s Mobile for Good summit in London. It was a high profile affair, and an extremely upbeat one. Yet I left with mixed feelings about where m4d is headed.

My five takeaways after a day of talks, debates, and demonstrations were:

  1. Everyone is still excited by the potential of mobile.
  2. The same projects surface over and over again as proof that mobile works.

  3. Mobile is still largely seen as a solution, not a tool.
  4. It’s up to the developed world to get mobile working for the poor.

  5. The top-down mindset is alive and well.

Suffice to say, all of these conclusions troubled me as I sat on the train home.

I’ve been thinking for some time about the future of m4d, and how far we’ve come over the past decade. I’ve written frequently about the opportunities mobile technology offers the development community and my fears that we may end up missing a golden opportunity. I’ve long been a champion of platforms and of understanding how we might build tools for people to take and deploy on their own terms. Yes, we should provide local entrepreneurs and grassroots nonprofits with tools—and where appropriate and requested, expertise—but we shouldn’t develop solutions to problems we don’t understand. We shouldn’t take ownership of a problem that isn’t ours, and we certainly shouldn’t build “solutions” from thousands of miles away and then jump on a plane in search of a home for them.

But this is still, on the whole, what seems to be happening. And this, I’m beginning to believe, is rapidly becoming ICT4D’s inconvenient truth.

A fulfilled future for ICT4D (of which m4d is an increasingly dominant part) is not the one I see playing out today. Its future is not in the hands of Western corporations or international NGOs meeting in high profile gatherings, and it’s not in American and European education establishments that busily train computer scientists and business graduates to fix the problems of “others.”

The whole development agenda is shifting. I predict we will see a major disconnect between what “we” think needs to be done, and what those closest to the problems think needs to be done. Call it disruptive development, if you like. As I told the UK Guardian in a December 2012 interview, “The rise of homegrown solutions to development problems will be most crucial in future. That means African software developers increasingly designing and developing solutions to African problems, many of which have previously been tackled by outsiders. This, I think, will be the biggest change in how development is ‘done.’”

I’m not the only person saying this. Many working at the intersection of African development and technology have been making the same argument for some time. The real change, and the big difference, is that this transition is finally happening. ICT4D is changing, and the balance of power is changing with it.

FrontlineSMS, a free, open source software I developed that has been used by developing world NGOs to distribute and collect information via text messages, is, I believe, part of this story. It started with field research in South Africa and the idea that users should be empowered to develop solutions to their own problems, if they so wish. There are many reasons why FrontlineSMS continues to work. One primary one is the decision of the new management team to shift software development to Nairobi, allowing us to tap into a rich vein of local developer and user talent. But fundamentally, FrontlineSMS’s platform continues to resonate with innovators, entrepreneurs, nonprofits, and problem owners across the developing world because it allows them to problem solve locally and effectively.

This local context is becoming increasingly powerful—as university students across Africa graduate with computer science and business management degrees; as innovation hubs spring up across the continent meeting a demand for places to meet, work, and network with like-minded problem solvers and entrepreneurs; and as investors launch funds that show they’re starting to take young African tech startups seriously.

This activity hasn’t escaped big business. Google, IBM, Microsoft, Nokia, Hewlett Packard, and Samsung have been opening offices across the continent, snapping up much of the talent in the process (ironically often at the expense—and despair—of local NGOs). But while technology businesses take note and develop local capacity that enables them to develop more appropriate local solutions, the broader development “community” seems trapped in an older mindset of technology transfer.

Technology transfer, of course, is big business—there’s no shortage of donor money out there for projects that seek to implement the latest and greatest proven Western innovations in a development context, and there are tens of thousands of jobs that keep the whole machine running. A lot has to change if the development community is to face these new realities, yet it’s looking more likely that the destiny of the discipline lies in the hands of the very people it originally set out to help.

So, if the future of ICT4D is not university students, NGOs, or business graduates devising solutions in labs and hubs thousands of miles away from their intended users, what is it?

Here is my prediction: Development is at a watershed moment, powered by accessible and affordable liberating technologies and an emerging army of determined, local talent. This local talent is gradually acquiring the skills, resources, and support it needs to take back ownership of many of its problems—problems of which it never took original ownership because those skills and resources were not available. Well, now they are.

The ICT4D community—educational establishments, donors, and technologists, among them—need to collectively recognize that it needs to adjust to this new reality, and work with technologists, entrepreneurs, and grassroots nonprofits across the developing world to accelerate what has become an inevitable shift. Or it can continue along its present path, and become increasingly irrelevant. “Innovate or die” doesn’t just apply to the technologies plied by the ICT4D community. It applies to the ICT4D community itself.

Complete Capital

We need integrated solutions, not just investment capital, to address social problems.

By Antony Bugg-Levine

Stanford Social Innovation


(Illustration by Shannon Freshwater)

Although we all would like to avoid more stories of economic doom and gloom, those of us who work with social service agencies and their clients are witnessing a sector in crisis. In the United States, the withdrawal of federal stimulus funding is echoing through the social spending system, shrinking budgets as needs grow. Demand for services rose 20 percent again last year, while for many essential organizations government funding failed to meet demand and private funding failed to fill the gap, according a 2012 state of the sector survey from Nonprofit Finance Fund (NFF). A similar story is playing out around the globe. We cannot afford to hunker down and wait for economic relief that may be many years away.

So what are we going to do? As the co-author of the recent book Impact Investing and the CEO of an organization (NFF) that has been lending to nonprofits for 32 years, I certainly believe that tapping into the resources and expertise of for-profit investment is part of the answer. The rise of the impact investment movement is poised to unlock substantial new capital for social purpose. Innovative nonprofits are already rethinking the way they do business and are going to heroic lengths to extract maximum impact from every dollar. And increasingly, we have the data and knowledge we need to tackle social ills.

But the ultimate contribution of impact investing, and similar innovations, will not come in the form of interesting investments or channeling grant money more efficiently. Instead, it will come by addressing two fundamental challenges of our moment: How will developed countries sustain a safety net in the wake of macroeconomic and demographic pressures? And how will developing countries ensure that economic growth is more equitably shared?

This approach is not over-idealistic; it can be achieved. At NFF, our experience working with thousands of nonprofit clients has led us to believe that innovations like impact investing can reach their potential when these innovations are integrated more effectively. Innovation is not good enough and cannot be an end in itself. Instead, we need to mobilize grant funding alongside investment capital, organizational innovation, and government collaboration. We call this approach “complete capital.”To answer those questions requires us to reframe how we work. We need to move away from silo approaches when we ask “Where can I make meaningful loans?” or “How can I give away my grant money better?” Instead, we must ask “How do we work together to solve the social challenges that matter?”

Complete capital is more than just another way to rebrand public-private partnerships. It is a framework for recognizing the complete set of perspectives and capabilities required to address complex social challenges. We believe that effective approaches will mobilize four types of capital:

  • Financial capital that both pays for expanded project delivery (such as new ambulances or shelter beds) and builds healthy and sustainable organizations. The combination of grants and investments will differ for each intervention, but the complete capital approach will bring sufficient resources to sustain operations, change business models, and facilitate growth.
  • Intellectual capital that draws on rapidly expanding evidence about what works and what does not at the business model and systems level.
  • Human capital that translates bold ideas into action. More than just a capable management team and board, human capital is the leadership ecosystem of outside advisors, volunteers, and clients that organizations need to thrive in challenging environments.
  • Social capital that enables people and organizations unused to working together to collaborate effectively. We will need to reposition government, private funders, organization leaders, and their clients in new relationships. Trust and creativity will be essential for social capital formation, supporting and pushing us to confront our collective challenges and embrace innovative solutions.

The Necessity of Complete Capital

Three recent examples show why a complete capital approach is necessary.

Among New York City’s 4,000 major social service agencies, many of which perennially struggle to break even, the question in 2009 was how the social safety net could be preserved when city reimbursements were delayed in the wake of the financial crisis. Deep budget cuts followed in 2010 and 2011, while demand for services grew. With a further $112 million reduction in New York City social spending in 2012, many of these organizations are on a slow-bleed trajectory that threatens their survival and the communities that rely on them.

Enter complete capital: NFF is responding by launching the Community Resilience Fund (CRF), an integrated grant, investment, and advisory services vehicle targeting up to 100 core social service agencies in New York City. CRF will bring together $50 million in loans from commercial banks and private foundations, aggregate millions of dollars of grant money from multiple funders, and draw on a loan guarantee from the city of New York. It will offer clients advisory services that draw on the intellectual capital developed by NFF over years of working with similar organizations faced with the need to change their business models. And substantial social capital has been spent to bring bankers, donors, service providers, and the city government together at a time of crisis that has left many wary and suspicious.

Another example of complete capital is playing out in California. There, lack of access to affordable fresh food creates “food deserts,” which exacerbate health inequalities in poor communities. The California Endowment has recognized that leaving the food desert problem unsolved could undermine its ability to meet ambitious targets to transform health outcomes for communities across California. But even its substantial grant funds would quickly run dry before it could address this problem at a large scale.

So last year, using a complete capital approach, the California Endowment used a $30 million anchor investment to catalyze the launch of the California FreshWorks Fund. The fund has raised $264 million in investment commitments from a range of commercial banks, impact investors, and private foundations, and it makes grants available to support innovative ideas that are not investment-ready. This approach drew on intellectual capital developed by the Reinvestment Fund based on a similar program in Pennsylvania; the human capital of NCB Capital Impact, which runs the California FreshWorks Fund; and the social capital of first lady Michelle Obama, who has boosted awareness of this work as part of her national campaign to combat obesity.

And this is not just a US phenomenon. In India, Shaffi Mathur and Ravi Krishnan became inspired to create an ambulance company when personal experiences showed them the importance of emergency health care. With two friends and $400,000, they launched Dial 1298 for Ambulance, dispatching ambulances to Mumbai residences. For clients seeking treatment in private hospitals, the company charged a fee, allowing free ambulance service to poor clients. To raise additional revenue, Dial 1298 sold ad space on its ambulances. But by 2007, demand outpaced capacity and existing revenue sources could not adequately fuel the company’s growth.

Enter complete capital: Between 2007 and 2009, the Dial 1298 team mobilized financial capital from impact investors, securing $2.5 million from the Acumen Fund and then accessing mainstream equity finance. Dial 1298’s central innovation—the tiered pricing model that allows wealthy customers to subsidize poor ones—draws on visionary ideas developed by organizations such as the Aravind Eye Care System. Beyond financial capital, Dial 1298 has benefited from human capital support from Acumen Fund, which has lent strategic planning experts, and the London Ambulance Service, which has provided advice. Yet the main resource for its expansion is state government contracts, which would not be available if Dial 1298’s founders and many others had not organized campaigns to ensure that these contracts are awarded on merit, not patronage.

What will it take to expand this approach? As these examples show, mobilizing complete capital is not for the faint of heart. It takes longer to pull off. It requires us to connect organizations and individuals used to operating in silos and to overcome legacy mindsets and mutual suspicions. Few organizations can afford to carry the costs of staff time while waiting to bring diverse partners across the finish line.

If a simpler way could work, we should follow it. But the social safety net will not repair itself—and we cannot count on the economy to return to a state where silo approaches are the norm.

In our time of crisis, it may be tempting to batten down the hatches and ride out the storm. But I believe we need to rebuild the boat. And to do that requires more than innovative carpenters to hammer nails better and sawyers to mill the best boards. We need all hands on deck.

Closing the Pioneer Gap

By Sasha Dichter, Robert Katz, Harvey Koh, & Ashish Karamchandani2 | Winter 2013

rice_burner_impact_investingHusk Power Systems, a growing social business, burns rice husks to generate power and provide electricity to low-income Indian villagers. (Photo by Harikrishna Katragadda/Greenpeace)

Bihar is far from the economic growth that has transformed Indian megacities like Mumbai, Delhi, and Chennai. It has the lowest rate of economic activity of any Indian state ($430 a year GDP per resident); between 80 and 90 percent of its villages have no electricity; and many of these villages are so remote that the government has declared them unreachable with the conventional electrical grid, consigning millions of people to darkness and poverty.

Gyanesh Pandey, Ratnesh Yadav, and Manoj Sinha knew there had to be a way to address this issue. In 2005, costs for producing renewable energy had been dropping globally, and they believed this represented an opportunity for Bihar to become part of India’s story of economic transformation. They experimented with different sources of renewable power and ultimately settled on rice husks. Bihar is in India’s rice belt, and the husk left over from milling rice grains is not only plentiful, it is generally considered a waste product as well. By developing their own small, low-cost, rice husk-fired power generators, the team believed they could produce reliable, renewable, and affordable electricity for the 70 million people who were off the grid.

The first plant the three social entrepreneurs built in 2007, using their own personal savings, looked modest. It produced just 30 to 35 kilowatts of power, required three operators to keep it running eight hours a day, and delivered power to about 400 homes in the surrounding village over low-voltage power lines strung up on bamboo poles. The economics of delivering power through this system were attractive, and the team believed that this new, small-scale design and mini-grid could be the key to lighting up rural India.

Although excited about the promise of the business, the team’s personal bank accounts were nearly depleted by the cost of developing and building this plant. With a business plan in hand, in 2007 they entered and won three business plan competitions at the University of Texas, the University of Virginia, and the Massachusetts Institute of Technology, netting them $97,500 in prize money. They used this money to construct and operate a second power plant, pay their growing team, and continue their research and development.

The three entrepreneurs also began talking to potential investors about investing in their company, named Husk Power Systems. Although there was some interest, the feedback they got was that the business was at an early stage and too risky for investment. The team was at an impasse. Between their personal savings and prize money they had invested nearly $170,000 into the company. They had two pilot sites up and running, providing about 800 customers in Bihar with access to clean and affordable power. But they still couldn’t raise the capital they needed to grow their business.

Husk’s story is not unique. Many other companies whose mission is providing the poor with critical products and services face similar challenges. Despite the growing numbers of impact investors and the billions of dollars pouring into social impact funds, entrepreneurs like Pandey, Yadav, and Sinha still have a tough time raising the money they need to grow their businesses. Philanthropy and prize money will only get them through the seed stage of development and is not enough to adequately fund an ongoing business, yet few investors will fund a company like Husk in the early stages.

Although many impact investors care about social impact, their primary goal is to generate a significant return on their investments. And despite its social promise and the huge demand for its service, a social business like Husk faces a daunting set of challenges: poor infrastructure, customers with limited ability to pay, the challenges of attracting talented managers, and nonexistent supply chains. These barriers mean additional costs and additional risks, and early-stage investors will very rarely realize high financial returns on their investments to compensate them for taking on these risks.

As a result, most investors, even those who care about impact, choose either to avoid these companies altogether or to invest at a later stage when the execution risk is lower or when the risks are better understood. This means that early-stage companies like Husk find it difficult to raise capital to grow their business. This hampers the growth of the market, and, ultimately, keeps poor people from accessing high-quality goods and services that can improve their lives.

In many ways, the Husk story reminds us of the early days of microfinance: a social entrepreneur (Muhammad Yunus) willing to look beyond conventional wisdom and experiment with market based approaches (loans, not charity) to serve the poor (Bangladeshi women). It’s easy to forget how revolutionary an idea microfinance was, and how much time and money it took to go from the seed of an idea to a global industry that today serves hundreds of millions of poor people with a critical service to improve their lives.

The question that entrepreneurs, impact investors, and everyone who believes that business can play a role in alleviating poverty must answer is this: What will it take to replicate the successes of microfinance in other critical areas such as drinking water, power, sanitation, agriculture, health care, housing, and education?

Rise of Impact Investing

Interest and activity in impact investing is booming. Since 2010, many of the major development agencies and development finance institutions have either launched their own calls for impact investing proposals or accelerated their direct investments into impact investment funds. In 2011 the Global Impact Investing Network and J.P. Morgan published a report predicting nearly $4 billion of impact investments in 2012, and as much as $1 trillion in the coming decade. At the 2012 Giving Pledge conference, whose billionaire attendees have pledged to donate at least half their wealth to charity, impact investing was the “hottest topic,” according to The Economist. And a 2012 Credit Suisse report affirmed J.P. Morgan’s claim that impact investing is a $1 trillion-plus market opportunity. Although these predictions are at a minimum ambitious, and at a maximum wildly inflated, there is no doubt that impact investing has captured the world’s imagination much as microfinance did before it.

The promise of impact investing is undeniable, but we believe there is a growing disconnect between the difficult realities of building inclusive businesses that serve the poor and the promises being made by many of the newer, more aggressive funds and financial institutions. Part of the reason for this disconnect is definitional. Clearly, when J.P. Morgan and Credit Suisse talk about a $1 trillion impact investment market they are using the broadest of definitions. Much of the capital that now qualifies as “impact investing” is invested in more traditional businesses in developing markets (such as real estate, large-scale infrastructure, shopping malls, and aluminum factories), a trend that has been going on for decades and that has accelerated because of the strong economic growth in many developing countries. In addition, there’s been a huge growth in clean tech investing (which some include in their definition of impact investing): According to a 2012 McKinsey & Co. report, up to $1.2 trillion could be invested in solar alone over the next decade. But only a small subset of these funds is investing in social businesses like Husk that target low-income customers in developing countries.

A broad definition of impact investing is in many ways appropriate because nearly all of this capital has the potential to create positive impacts on society. But a broad definition also masks the fact that most funds—even those that talk about fighting poverty—bypass the more difficult, longer-term, and less financially lucrative investments that directly benefit the poor, and instead gravitate toward the easier, quicker, and more financially lucrative opportunities that target broader segments of society.

Today, only a small subset of impact investing funds are willing to take on the high risks and low- to mid-single digit annual returns that come with investing in these markets. This is particularly surprising given the actual track record of the global venture capital industry. According to a recent study by the Kauffman Foundation analyzing the investment returns of its $250 million invested in 100 venture capital funds, only a third of these funds exceeded the returns available in the public markets and, as an overall conclusion, “the average venture capital fund fails to return investor capital after fees.” If Kauffman’s experience is representative, it suggests that venture capital investing has not adequately compensated limited partners for the high risk and low liquidity of these investments. Nevertheless the rhetoric in impact investing is that “market” rates of net return should be 10 to 15 percent per year or higher.

Realities on the Ground

To better understand the subsector of impact investors and other funders that focus primarily on supporting companies that directly address long-standing social inequities, especially global poverty, we undertook a research project funded by the Bill & Melinda Gates Foundation. Specifically, we wanted to understand the sources of capital available to early-stage entrepreneurs focused on low-income markets, why it is still so difficult for them to raise money, and what it takes to scale up new businesses in these markets.

Our starting point was the research that Monitor Inclusive Markets (a unit of Monitor Group) had already undertaken of more than 700 businesses in India and sub-Saharan Africa. We then conducted a broad overview of the impact investing market—mostly at the fund level to understand investment strategies—and then undertook an in-depth look at Acumen Fund’s $77 million investment portfolio in 71 companies in India, Pakistan, and East and West Africa.

We pored over reams of data, including detailed social, operational, and financial performance information from Acumen’s portfolio as well as detailed reports on capital sources, including grants and subsidies. With early data in hand, we tested our hypotheses and initial findings by conducting extended interviews with more than 60 sector experts—investors, entrepreneurs, policymakers, and donors. Because we had access to the full Acumen database, we conducted deep-dive investigations into more than 20 companies, the first time an impact investor has submitted its portfolio results for this kind of external analysis.

Building an Inclusive Business

One of the first things we learned is that creating and growing a company like Husk is difficult, much more difficult than building a traditional business. These social entrepreneurs are truly pioneers. Not only are they aiming to provide new products and services to customers with both low incomes and an appropriate aversion to changing long-standing practices, these entrepreneurs also need to overcome the additional challenges of poor physical infrastructure, underdeveloped value chains, and thin pools of skilled labor to build their businesses. As a result, costs rise, time horizons lengthen, and roadblocks come up—all of which can be overcome, but it takes time and money to do so.

For Husk, for example, building a mini power plant that could generate energy from burning rice husks was challenging enough. But to make the innovation commercially viable the company had to develop a consistent source of rice husk, string wires on bamboo poles to connect every house in the village, create an electronic metering and payment system for customers with no credit history, and create Husk Power University to recruit and train the mechanics, engineers, and operators needed to run the plants. Although a new power company in a developed market would just build a plant or rebrand and resell power, Husk had to build a fully vertically integrated company that does everything from sourcing feedstock to producing power to deliver to people’s homes to collecting payment. Each of these pieces of the value chain is critical to Husk’s commercial viability, but they layer on additional direct costs and add degrees of difficulty to the successful execution of the company’s business plan. From an investor’s perspective, that means higher costs and more execution risk without larger financial returns, because Husk’s customers, even if there might be millions of them, have a limited ability to pay for power.


To better understand Husk’s evolution, consider the four stages of development that a new, pioneering enterprise undergoes: blueprint, validate, prepare, and scale. (See “Scaling a Business,” above.) Pioneering social entrepreneurs have an idea and develop plans—a rough blueprint—for a business that could disrupt the status quo and make a dent in a big problem. The entrepreneurs then take their ideas and begin market tests that require multiple rounds of trials to prototype, refine, and validate the business model, to learn that the product or service works and that customers are willing to buy it at a price that will provide a sufficient return to support the company in the long term. Next, the company needs to prepare for growth, both internally (for example, strengthening the executive team, board, governance, and operating systems) and externally (for example, stimulating customer demand for its products and establishing effective distribution channels to get its products to the customer). Only then is the company in a position to scale up the business.

The Pioneer Gap

One of the most striking findings of our research is that few impact investors are willing to invest in companies targeting the poor, and even fewer are willing to invest at the early stages of the creation of these businesses, a problem that we call the Pioneer Gap. Monitor found that only six of the 84 funds investing in Africa offer early-stage capital. This finding was confirmed by interviews we conducted with nearly 30 impact investors: The overwhelming majority of these funds and advisors expressed a strong preference for investing in the later stage of a company’s development—scale—after commercial viability had been established and preferably once market conditions were well prepared for growth.

The reason this happens is twofold. The first is ideological, the belief that by definition anything that uses investing tools must hit market rates of return—without a clear definition of which market those returns are based on. The second reason is structural: Most of the money going into impact investing still relies on traditional fund structures with traditional return expectations. Funders look to investors to realize significant financial returns and create social impact, but in practice the financial returns nearly always come first for funds with external sources of capital.

What our research uncovered is that although there certainly are many businesses with positive social impact and promising financial prospects, businesses that directly serve the poor nearly always operate in environments that make outsized financial returns extremely unlikely. At Husk, for example, the costs of building out each piece of the supply chain may never provide financial returns for investors, and yet without Husk or someone else taking on these costs, the business will never grow and millions of Biharis will continue to live without power.

Viewed through a purely financial lens, the decision not to invest in Husk at a very early stage makes sense. The early stages of a social business are beset with complexities—all the challenges of a traditional startup, multiplied by the very difficult operating environment—and a potential investor will be unlikely to realize outsized financial returns within an acceptable time frame (typically five to seven years). Viewed through an impact lens, however, this approach makes no sense. Impact investing was meant to fill the gap faced by companies like Husk. And although there is certainly much more capital available than there was just five years ago, most of it is for later-stage investing.

Understanding these limitations, early-stage social businesses tend to look to other sources of funding, particularly grants. Our analysis shows that most social businesses—whether in Acumen’s portfolio or in the broader landscape surveyed by Monitor—had received meaningful grant support early in their development. Of the 71 companies in Acumen Fund’s portfolio, 67 received grants at the blueprint, validate, or prepare stages. These grants paid for the market development costs that companies serving the poor must meet in order to function.

Husk provides an excellent example of the role strategic grants play in building an early-stage social business. Pandey, Yadav, and Sinha had established a blueprint for providing off-grid power in Bihar, but were having limited success raising early-stage capital to complete the validate stage of their growth. In 2008, with two power systems up and running, the Husk team met Simon Desjardins, program manager of the Shell Foundation’s Access to Energy program. Desjardins’s goal was to bring modern energy to low-income communities by backing promising ventures in emerging economies, and Husk seemed to fit the bill.

Fortunately for Husk, Desjardins was not a traditional program officer, and Shell was not a traditional grantmaker. Rather than simply make a grant to Husk to help it provide power to more villages, Desjardins asked an atypical question: How could grants help Husk get to a point where it would be more attractive to investors? Desjardins and the Husk team set out to determine what investors would need to see in order to fund Husk. They agreed that investors expected the team to have more plants in place, to lower the cost of each plant, and to demonstrate the ability to build plants and sign up customers more quickly and efficiently.

So Shell’s grants were tied to Husk hitting a series of operational milestones. The first grant called for Husk to build three additional plants in six months—faster than they had built them before—and maintain consistent uptime at each plant. Later grants pushed the company to reduce the cost of building a plant, develop a proprietary payment system, build local mini-grids, create and implement health, safety, and environmental safeguards, and establish Husk Power University. In total, Shell gave Husk Power $2.3 million in grants between 2008 and 2011 to hit these milestones.

In addition to the Shell grants, Husk benefited from a new policy by the Indian Ministry of New and Renewable Energy to give a capital subsidy to companies providing power to off-grid villages. This significantly reduced Husk’s out-of-pocket costs to build a plant and helped individual plants reach profitability within an acceptable time horizon.

Meanwhile, from 2007 to 2009 Husk stayed in active conversation with Acumen and other potential investors. By late 2008, with 10 plants in place and having hit nearly all of the milestones called for in the early Shell grants, Husk was finally ready to attract impact investors. The company was still small—with fewer than 10 plants serving a few thousand households—and years away from profitability, so the risks were still high. Yet Husk had enough of a track record to attract a $1.65 million pre-Series A round of investment led by Acumen Fund, with participation by LGT Venture PhilanthropyBamboo Finance, and Draper Fisher Jurvetson.

Since 2009, Husk has grown from 10 to 75 plants and is on track to open hundreds more in the coming years. Strategic grants, a well-executed public subsidy program, and investor capital came together to help Husk’s team reach these impressive milestones.

Enterprise Philanthropy

Husk’s early growth required a combination of founder money, targeted grants aimed at achieving specific operational milestones, public subsidy, and impact-focused investors willing to take an early bet on a promising young company. Across the Acumen portfolio we see the most successful companies walk a similar path, balancing the needs of multiple stakeholders and finding creative ways to attract different types of capital at different stages of their growth. (See “Successful Enterprise Grantmaking,” below.)


One of the most critical sources of funding at the early stages of a company’s growth was from what we call “enterprise philanthropy.” This kind of philanthropy—exemplified by the grants given by the Shell Foundation—provide grants along with ongoing, hands-on support to help companies move from the blueprint through the validate stage of their development. Enterprise philanthropists are not only willing to make grants, they are also willing to invest time and money in social businesses at the early stage of their growth. By doing so they are helping firms bridge the Pioneer Gap.

Not every grant to a company qualifies as enterprise philanthropy. A successful enterprise grant will accelerate the development of a social business and position the business to take on investor capital. Enterprise philanthropy, as distinct from traditional grantmaking, has four distinct characteristics: an aligned purpose; a focus on a profitable proposition; clear progression through operating milestones; andpersistence through the many cycles of iteration of a new business model. (See “The Four P’s of Enterprise Philanthropy,” below.)


In our research we saw examples of successful enterprise grants as well as other grants to companies that clearly failed. When the grants failed, it often was because there wasn’t an alignment of purpose between grantmaker, investors, and the company, or the grant did not help the company get to a profitable proposition. Enterprise grantmaking is difficult in practice. It requires a high degree of engagement and successful management of previously strange bedfellows (donors, entrepreneurs, and investors).

It is therefore not surprising that giving grants to a business is not something that most philanthropists are used to doing. If anything, enterprise grantmaking runs counter to traditional philanthropic practice. In Shell’s case, grant money was used to build a local talent pool, develop metering systems, and create safety standards and practice—costly investments in the value chain that a traditional power company in the developed world would not have to make. Although Shell understood the potentially catalytic effect of these targeted grants, most grantmakers would not feel comfortable giving grants that don’t have a direct impact on villagers’ lives.

Bridging the Pioneer Gap

The reason the Pioneer Gap exists is the persistent misalignment between the demands of investor capital and the economic realities of building businesses that serve low-income customers. The risks of investing in these types of businesses are simply too high and the financial payoffs too low to consistently realize funds’ expected returns.

Philanthropy and other grant capital, including public funding, have an important role to play in closing this gap. As the Husk example illustrates, direct grants to the company and a government subsidy program both played significant roles in accelerating the growth of the business without distorting the end market for affordable power in rural Bihar.

The big question is whether enterprise philanthropy can grow large enough to meet the need. Enterprise grantmaking is hard to do, it often requires hands-on support and high engagement, and it is different enough from traditional grantmaking that it will feel very foreign to most grantmakers. It is hard to imagine a world in which billions or tens of billions of dollars of enterprise philanthropy flow into the sector as direct grants. The challenge is not just the availability of philanthropic capital and the mindset shift that would have to occur on the part of grantmakers, it is also that an entire infrastructure of enterprise grantmakers, on the ground and able to work directly with companies, would have to be built globally. This is certainly possible, but it is daunting.

A complementary solution to addressing the Pioneer Gap is to increase the supply of impact investment capital whose risk/return profile is aligned with the realities of early-stage companies in remote, underserved markets. Despite the rhetoric of the impact investing sector, our interviews affirm that most impact investors won’t invest in the early stage. And why would they? Most impact investment funds are backed by limited partners who expect returns of 10 to 15 percent per year or higher. Although there’s no doubt that some risky early-stage ventures with huge potential social impact will offer these levels of financial return, our research shows that most of these early-stage companies do not offer a sufficiently attractive investment proposition to hit this financial benchmark across a portfolio.

The clear solution is to create more investment funds that have more moderate financial return targets—for example, 5 percent per year or lower. These funds, whether investment capital or philanthropy, would be designed to look for the highest social return; those structured as investment funds would hit a minimum threshold of financial return. This orientation would be the exact opposite of what is predominantly happening in today’s impact investing market, where financial returns are paramount and firms must hit minimum social impact targets.

What might such funds look like? The simplest and most attractive approach is for limited partners to make their social impact thesis more rigorous and explicit and then offer capital to investment funds that will commit to hitting these social targets while offering a more modest rate of financial return. To make this work, the investment committees of the major institutional funders—many of them government bodies funded by public monies—would have to be comfortable having a subset of their investment capital explicitly structured to tolerate lower financial returns in order to achieve more aggressive social impact targets.

Another approach would be to build more blended investment funds that combine investment capital with philanthropic or technical support funding. For example, a new $50 million investment fund could also raise a $10 million philanthropic fund—this approach is similar to the recent fund raised by Grassroots Business Fund. The advantage of this structure is that it gives the investors freedom to deploy targeted grant capital to their investees, much like the Shell Foundation did for Husk Power Systems. In addition, by having the investor provide both the grant and investment capital, getting alignment of purpose toward creating a profitable business proposition is a more straightforward undertaking. The challenge of course is that most investors are not adept at raising philanthropy, and many philanthropic funders do not want to feel they are subsidizing investors’ returns. So, although conceptually attractive, this approach has some limitations in practice unless individual investors prove more willing to provide both investment and grant capital.

Finally, at the most aggressive end of the impact spectrum, more funds could be created that are backed by philanthropic capital. Acumen Fund is one such model, as is any fund created from private capital that doesn’t have an explicit return expectation to external investors. Such philanthropically backed funds have the most flexibility to take early-stage risk and to test the limits of where markets will work to solve some of the toughest social issues.

Although it is easy to describe each of the three solutions above, it is difficult to make more of this funding materialize in practice. Investment committees are slow to change their investment theses and their risk tolerance, and it is challenging for a limited partner thousands of miles away from an investment to be able to distinguish between the kinds of impact different funds will actually have on the ground—meaning higher-return funds can look like they represent limited trade-offs in terms of impact. Harder still is to increase the supply of philanthropy, both because philanthropy is always difficult to raise and, more challenging still, because the growing orthodoxy is that impact investing can and should be funded by traditional investor capital.

One way to attack this problem is to have more fund managers and more funders experimenting with fund structures that more directly and appropriately align fund partners with the fund’s impact objectives: rather than use traditional fund structures that provide incentives to maximize fund returns (through carry), create funds that explicitly aim to maximize social impact while requiring a lower minimum return on invested capital. For example, a fund could have a bonus structure whose sole payout mechanism is a function of hitting social impact targets, instead of specific financial targets.

More broadly, the sector needs a mindset shift. For the impact investing sector to reach its potential, it needs to return to first principles and articulate what kind of impact we aim to create for which populations. Our research has shown us that unless we create a structural shift in the supply of capital, the Pioneer Gap will persist; businesses that most aggressively target the most difficult-to-reach people and the toughest social problems will continue to struggle for funding; and “impact” will be loosely defined rather than a core purpose of nearly all impact investing funds.

The Future of Impact Investing

The growing interest in impact investing is a sign of an emerging consensus: the time has come to use the tools of business and investing to achieve social good. In the froth of excitement surrounding impact investing, however, we worry that a limited notion of the tools of impact investing may be hamstringing its goal: to build and scale organizations that help to solve big social problems.

A close look at impact investing reveals myriad investing goals, theories of change, and financial return expectations. It is early enough in the life of the sector that no one philosophy or approach can confidently claim to achieve the greatest impact per dollar invested. But for any of these approaches to flourish, we need much more clarity about our definitions of success. Impact investing was created as a reaction to the limitations of single bottom line investing, yet ironically many of the newest impact investing funds have traditional private equity fund structures that expect high financial returns and that compensate fund partners on these financial returns without any explicit aim or incentive for achieving social impact targets.

At Acumen, the investing in impact investing has always been a means, not an end in itself. For most other funds that cannot be the case because of investor demands for high financial returns. One of the risks we face is that more and more of the capital coming into impact investing has impact as a secondary goal. Our research indicates that it is difficult if not impossible to have impact as a primary goal while generating consistent capital growth for limited partners. Driven by the traditional fund structures and return expectations, many fund managers will have no choice but to screen out all investments that promise anything less than significant capital growth. With that as a first screen they will quickly discover that they cannot invest in many of the most innovative, early-stage, high-potential businesses.

The result will be that the Pioneer Gap will persist, and many of the most promising social businesses will have to improvise to raise money. Philanthropic grants can play an important role in funding early-stage companies, but we worry that they do not have sufficient funds to meet the needs of the sector. Targeted government subsidies and funding can also play a role, but they have to date also proven to be insufficient. Without a structural change in the capital market for social businesses that attracts more impact investors, many will fail to bridge this gap.

The problem is not one of will. Many new and existing impact investors are doing this work because they care profoundly about social impact. But there are two major barriers to creating a well-functioning impact investing marketplace. The first is ideology—the simple notion that any investment involving trade-offs or submarket rates of return inherently is bad investing and is unsustainable. The second is a lack of imagination on the part of funders to create products that match the real needs in the marketplace.

Over the course of our study we heard a lot of frustration. Impact investors are frustrated that there are not enough investment-ready companies, which makes it hard for them to meet their stated financial and social goals. Social entrepreneurs are frustrated because in the early stages of the company’s development, when they need money most, impact investors won’t invest. The market has incredible potential, but this potential will be realized only if investing capital can align itself with the realities on the ground. And until the enabling environment for pioneering social businesses changes radically until we have better infrastructure, deeper talent pools, and more proven business models—investors will not be financially compensated for the risks they take.

Impact investing has come far as a sector. Just a decade ago, the notion that philanthropy could be used for investment was unheard of. The idea that direct grants to a for-profit company could be a mainstream strategy to fight poverty would have seemed absurd. The idea that pursuing social impact could be incorporated in an investing strategy—whether in public or private markets—was seen as a fringe notion. So much has become mainstream, so much more is possible, but only if we realize that we are just at the beginning.

Premature Incorporation: Don’t let it happen to you.

By Kevin Starr | 10 | Dec. 11, 2012

Stanford Social Innovation Review

I’m spending an inordinate amount of time these days talking social entrepreneurs out of launching for-profits. Many drank deeply of the impact-investing Kool-Aid, and came away believing that going for-profit is the only way to drive financial and operational discipline, that it will give them immediate access to much more capital, and that they will find the holy grail of sustainability while the deluded do-gooders who went nonprofit are still grubbing around in the bushes for donations.

It’s mostly bullshit.

Instead, a typical scenario goes like this: Social entrepreneur has cool idea. Social entrepreneur launches for-profit venture with own/friends’/family’s dough, maybe even gets a chunk or two of seed funding. Hard work ensues. Money runs out. Venture is nowhere near ready for real investment. Venture goes off a cliff.

Sure, there are exceptions. Sometimes those revenue projections turn out to be accurate. Sometimes the entrepreneur is ridiculously good at raising money. Sometimes they just get lucky. Mostly, though, it follows the script, and here’s why: Social entrepreneurship is largely about overcoming market failure. That is a lengthy and expensive undertaking, and even if you manage to pull it off, the result is rarely lucrative—and the more profound the social impact, the more expensive and less lucrative it’s likely to be.

It’s expensive because there is usually a ton of R&D to do before you emerge with a viable business model. It’s one thing if you’re just tweaking a proven microfinance model or adding a mobile platform—wow!—to something that already works. It’s another thing entirely if you’re tackling a big problem in a new way, in a place where markets don’t work very well. You’re going to need a lot of runway to go through all the iterative cycles it will take to end up with something that makes sense to people who expect to get their money back.

You need—and ought to get—free money to do it. Philanthropy, done well, is about making good things happen that wouldn’t have happened otherwise. When you come up with a high-impact solution that can spark a new industry, that’s a public good. I used to think that spending philanthropic money on something that someone else will someday make money from was somehow unethical. I was wrong. When you can make the case that it generates big social impact that wouldn’t have happened otherwise, it’s a home run for philanthropy and something that we ought to be searching for.

But if you launch right away as a for-profit, you’ll likely end up an orphan: Philanthropists won’t know what to do with you, and investors will rightly view your firm as a lousy place to put their money. You’ve made it hard for philanthropists to give you grants, and you offer investors an unlovely combination of high risk and low returns. In short, you’re screwed.

Some point to hybrids as an answer. I don’t like them. Trying to remember their convoluted structures is like waking from a dream—after a few moments of clarity, the whole thing slips away. Worse, they too often succumb to the temptation to dump all the questionable parts of the business model into the nonprofit side. Aside from the inherent lameness of that, the result can be a sort of stealth-subsidized business model that will never scale. The other big problem with hybrids is that if one side of the arrangement bombs, it pulls down the other—and in any case, the two sides rarely grow at the same pace. I’ve seen a few hybrids that work well—typically with the nonprofit side focused on R&D to drive new impact—but by and large, I think they’re messy one-offs.

I’d like to see a sequential approach become the norm: If you have a potentially high-impact new idea, you start out as a subsidized nonprofit that is focused on developing a scalable business model worthy of real capital. If you manage to get there, the organization flips into a for-profit and raises money from investors. The emerging business must be structured to ensure that it stays on mission, but that can be managed. We haven’t worked out all the kinks yet, but it’s cleaner than the alternative and more likely to produce a business that really can scale via the market. All we need to make it work are philanthropists and investors who know their jobs and are willing to try something (kind of) new.

And if your impact is profound but your breakeven point stays over the horizon, you can simply remain a nonprofit. You can’t sell equity, but you can get grants and cheap loans. Grants are free money, and zero-interest loans to nonprofits are not unheard of. Better a struggling nonprofit than a dead for-profit, and given the overall performance of social enterprise equity investments so far, would-be impact investors might want to save themselves a headache and just give you the money instead. They probably weren’t going to see it again anyway.

As weird as it sounds, for your lovely idea to survive and get to scale, you may need to dodge the world of impact investing for a while. Remember all that patient capital that was supposed to show up for all you and your fellow social entrepreneurs? Most of it was so lacking in urgency that it never left home. It probably never will show up: It doesn’t make philanthropists feel good, and it doesn’t make investors feel smart. Given that, you might want to stay in a cozy nonprofit burrow until your business is strong enough to survive above ground. When—and if—you do poke your head out, keep in mind that the right financial structure is the one that provides the best path to the maximum social impact. Nothing else really matters.

In West Bengal, Cashless Microfinance Opens Doors

NY Times 26th September, 2012

In West Bengal, Cashless Microfinance Opens Doors for Women

By SONIA FALEIROGolehar Sheikh with her daughters outside their home in Belekhali village in West Bengal, April 2012.

Sonia Faleiro

Golehar Sheikh with her daughters outside their home in Belekhali village in West Bengal, April 2012.

CANNING, West Bengal — A debt crisis in India’s microfinance sector in Andhra Pradesh in 2010 revived the question of how to help the hard-core poor without forcing them into a debt trap. Now it appears that microfinance institutions may have had an alternative all along.

The hard-core poor, or people who live far below the national poverty line, are vulnerable to even small changes in circumstance, from a shift in daily wages to the onset of heavy rains. Repaying a microloan can become an untenable proposition.

Exploring subcultures and forgotten communities.

This is particularly true of rural women, who accounted for 97 percent of microfinance loans in India in 2011 according to the data center MixMarket, but are less likely than men to be literate or to have the same skills and experience to earn as much. This is where a handful of microfinance institutions — among them Bandhan, currently India’s largest such lender — come in.

Bandhan’s Targeting the Hardcore Poor program was inspired by one pioneered by BRAC, a community development group, in Bangladesh in 2002. Bandhan’s program is not for profit and offers cash-free grants to selected participants in poor villages for 24 months. A “grant” refers to everything a borrower may need to start and ply a sustainable trade — everything, that is, but cash.

A crucial aspect of the program is lifestyle changes to advance good health and critical awareness. A borrower is taught to manage money, but is also made aware of the need to drink clean water and eat two meals a day. They’re schooled in basic numbers and letters.

The borrower, who is often a woman, never has to repay the cost of the goods. Only if she graduates from the program, though, by making a profit and adopting the lifestyle changes, will she be considered for a micro-loan, and, therefore, entry into the microfinance system. At this point she’s considered dependable enough to handle money, protecting herself while also reassuring the lender.

Sabuajaan Mollah, a resident of Dhuri village in West Bengal goes door to door selling trinkets.
Sonia Faleiro

Sabuajaan Mollah, a resident of Dhuri village in West Bengal goes door to door selling trinkets.

Sabuajaan Mollah, 54, lives in Canning, one of West Bengal’s poorest areas. She goes from door to door selling trinkets. Mrs. Mollah, who’s widowed, wasn’t just provided with the trinkets, but also a cane basket and plastic bags to carry them in.

When Bandhan approached Mrs. Mollah in December, she, her elderly mother and her 16-year-old daughter were surviving on just one meal a day. She worked as a domestic help in Kolkata, several hours away. At times her employers paid her in boiled rice. Mrs. Mollah now earns an average of 300 rupees ($5) a day and puts aside 10 rupees a week. It’s a small amount, but it’s more than she’s ever been able to save. “Now we eat twice a day,” she says.

Although the grant is cash-free, the program isn’t. Mrs. Mollah is given a livelihood stipend of 140 rupees a week to support her during the program.

Golehar Sheikh, who lives a few hours away from Mrs. Mollah, is who Mrs. Mollah hopes to become in 24 months. Mrs. Sheikh, 36, successfully graduated from Bandhan’s program in 2009. Since then she’s taken three successively larger microloans and hopes to soon own her own shop.

Every evening, Mrs. Sheikh takes a train to Kolkata, where she buys beef from the wholesale market on Park Street. At night she sleeps in the market, in a shared room paid for by local traders who want to encourage poor entrepreneurs like her to take their time shopping. The raw meat sits at the foot of her mat, bundled in layers of cloth, plastic and sacking.

At dawn, Mrs. Sheikh returns to Canning, covering as many as five villages on foot with her basket on her head. Beef is forbidden to Hindus, so Mrs. Sheikh, who’s Muslim, confines herself to Muslim-majority villages.

Eight years ago, after being abandoned by her husband, Mrs. Sheikh and her two daughters moved into a shack at the edge of someone else’s field. She begged for alms and foraged for fruit. Today, she lives in a two-room hut and has land of her own. Hers is still a difficult life, but she has assets she can count on should her luck again change. “I have dreams for my daughters,” she says. “And now I can help them come true.”

SKS Microfinance, the lender that triggered the Andhra Pradesh crisis, was also inspired by BRAC to create a similar program, which lasts 18 months. And Trickle Up, which offers a three-year program in four states, says that 100 percent of its borrowers, who are all women, have increased their net assets by an average of $330. Prior to graduating, the women had minimal assets and most were in debt. These programs, like that of Bandhan, are not for profit, and are funded largely (or, in the case of Trickle Up, entirely) by donors.

In 2011 the M.I.T. economist Abhijit Banerjee co-authored a randomized test of Bandhan’s program. He says that the team found “very strong positive results” and that it was clear that “beneficiaries were substantially better off in terms of how much they ate, measures of depression, schooling for children and other indicators.”

The hard-core poor have no liquid assets, which they require to pull themselves out of poverty. But putting mere cash in the hands of people whose immediate concerns are regular meals and safe shelter is risky for them and for their lenders.

This is why the bridge programs inspired by BRAC are so important. They offer the poor opportunity but without the initial risk of debt. But they also demand commitment and require change in the habits that may hurt the potential gains from microloans.

“I have a daughter to marry off,” says Mrs. Mollah. “So I work all day and worry all night. But I’ve seen a transformation in my life. What more can I ask for?”

Sonia Faleiro is the author of Beautiful Thing: Inside the Secret World of Bombay’s Dance Bars. Read her latest OpEd for The New York Times, ‘For India’s Children, Philanthropy Isn’t Enough.’

Rockefeller’s High-Impact Investment

Huffington Post
David Bank

19th September, 2012

The provenance of the term “impact investing,” according to the official founding myth, was a 2007 gathering of leaders on Lake Como, high in the Italian Alps, at Bellagio, the Rockefeller Foundation’s spectacular retreat center. The group reconvened the next year, and Rockefeller’s board approved a $38 million impact investing initiative.

It was not quite a present-at-the-creation moment, because social investing, social enterprises, social entrepreneurs and a whole world of community development finance had existed for decades. But after grants and investments to 30 core allies, it can be said that the two Bellagio meetings launched much of the network of organizations and activities that now define impact investing.

Rockefeller’s impact investing initiative was slated to end about now, but earlier this year the board extended it through 2013. With sunset approaching, the foundation has issued two self-assessments of the initiative’s impact, prepared by the consulting firm E.T. Jackson and Associates. “The initiative succeeded in defining the field of impact investing, thus enabling collective action from diverse stakeholders,” concludes Unlocking Capital, Activating a Movement, the foundation’s internal report.

Indeed, if impact investing grows as rapidly as the projections made by Rockefeller’s own grantees, the impact investing initiative may well become a case study in philanthropic leverage. The external report, Accelerating Impact, cites:

  • A 2011 report from J.P. Morgan, based on surveys by the Global Impact Investing Network (GIIN), suggesting that approximately 2,200 impact investments worth $4.4 billion were made in 2011, up from 1,000 deals worth $2.5 billion the year before;
  • A 2008 estimate by the Monitor Institute estimated the industry could grow to $500 billion within five to ten years, representing an estimated 1% of global assets under management;
  • Another J.P. Morgan report in 2010 estimating a profit potential ranging from $183 billion to $667 billion, and invested capital in the range of $400 billion to nearly $1 trillion, in just five key areas.

There are of course significant caveats and footnotes on all of those projections, and all standard disclaimers about forward-looking statements, and more, should apply.

But what may be more noteworthy is that the GIIN, the seminal Monitor Institute report (Investing for Social and Environmental Impact) and even the two J.P. Morgan reports were all financed by Rockefeller. As are the Impact Reporting and Investment Standards (IRIS) and Global Impact Investing Rating System (GIIRS), the two main reporting and data-gathering efforts. Acumen Fund, the pioneering social venture fund that itself was originally spun out of Rockefeller Foundation, was instrumental in IRIS as was B Lab, the nonprofit certification body that annoints “B-Corps.” B Lab is also managing GIIRS, and rolling out an analytics platform to rate companies and funds, all backed by Rockefeller. Rockefeller also finances the valuable policy work conducted by Insight at Pacific Community Ventures and the Initiative for Responsible Investment at Harvard University. And dozens of other mutually reinforcing projects and research efforts.

That makes one of the biggest ‘if’s in the future of impact investing, what happens if — more like, when — this whole network loses the cachet, not to mention the funding, conferred by Rockefeller. The most widely read section of Accelerating Impact may be Appendix C, which makes recommendations for the remainder of the funding. The appendix makes clear that the gravy train is over: one recommendation is to help in “smoothly and constructively winding down and handing off” even the most successful projects. The GIIN (“continued active support”), along with IRIS and GIIRS (“active promotion”) are called out for some level of ongoing engagement. But the action is already shifting to the targets of Rockefeller’s “two-year transitional phase.”

Those targets include “platforms and networks” in places like Kenya, India, Hong Kong and Mexico and new investment products and distribution platforms , particularly that can engage “larger investors that have shown an appetite for making impact investments.”

Perhaps most significantly, if a bit cryptically, Rockefeller is seeking to “test ways of improving investment readiness on the demand side.” That’s impact industry-speak for expanding the pipeline of investment-ready ventures with management teams, business plans and the ability to scale up operations. That reflects the new conventional wisdom that the supply of capital may have outstripped demand in the form of attractive deals (see Impact IQ’s very first post, “Social Bubble”). Expect a raft of organizations to try to pivot from accelerating investment to accelerating entrepreneurship and operational capacity.

There are worse legacies Rockefeller could leave than “too much money” for social and environmental ventures. But the full assessment of Rockefeller’s impact investing initiative will have to await its actual exit, when the new investment marketplace it helped spawn will grow, or not, on its own.

ADB Helps Vietnam Develop Inclusive Market and Oriented Microfinance Sector

HANOI – Asian Development Bank (ADB) and the Government of Viet Nam today signed an agreement for a US$40 million loan to support the Government’s policy reforms to improve the quality, accessibility, efficiency, and competitiveness of the country’s microfinance sector under the Microfinance Development Programme.

The signatories included the State Bank of Viet Nam Governor, Nguyen Van Binh, and ADB Country Director for Viet Nam, Tomoyuki Kimura.

Kimura said Viet Nam should address the need for more responsive, inclusive microfinance services to narrow the development gaps and improve the poor’s access to opportunities and social services.

In response to the Government’s commitment to developing a market-oriented microfinance sector, ADB has approved the first microfinance development programme with technical assistance grant for Viet Nam as a continuous support to a sustainable sector development. The programme is a pipeline project in the latest ADB’s Country Partnership Strategy with the Government of Viet Nam.

The Microfinance Development Programme will seek to integrate microfinance into the formal financial sector by nurturing emerging microfinance institutions to become formal financial institutions licensed by the State Bank of Viet Nam, and at the same time, encouraging reform and restructuring of microfinance-involved state financial institutions – the Viet Nam Bank for Social Polices and the Central People’s Credit Fund.

It also helps enhance operational and supervisory capacities of microfinance, and supports the development of financial infrastructure including a training institute, advocacy programmes, and a consumer protection scheme, as well as a credit information exchange system. – VNS