Making innovative use of corporate assets to generate business and impact in developing countries

August 3, 2019

Project details

Companies are increasingly seeing the opportunity of investing in developing markets and merging their business and CSR strategies. USAID and other donor organizations want to seize this opportunity. Now is the time to create investment synergies and increase their impact in emerging markets. In this scope, KOIS helped USAID map and assess the existing CSR investment models.

Collaborating with the private sector to create impact in developing economies

Increasingly, corporations are looking to emerging countries as high-potential markets for the future. In sectors such as healthcare, agro-industry or energy, these markets could strongly benefit from corporate financing.

As a reality check however, emerging markets are sometimes not mature enough. Though it is advantageous for corporates to have a headstart and there is a strong benefit for local economies today, the only way to increase their presence is by finding creative ways to deploy and fund local operations.

In this context, donors such as USAID want to seize the opportunity to play a catalytic role in supporting the development and scale-up of impact and CSR investment initiatives by corporates in developing economies. USAID already leverages its resources through INVEST, an initiative that mobilizes investment for development, but wishes to unlock the potential of private capital to drive inclusive growth in countries around the world.

A New form of collaboration

In fact, investment synergies in high-impact areas such as agriculture, infrastructure, energy, clean water, health, and education could lead to even greater impact in the field. However, they require new forms of collaboration between USAID and the investment & business community.

KOIS helped USAID map the existing CSR investment models and assessed them based on a set of criteria. KOIS also conducted a deep-dive evaluation and tested the appetite of multiple corporates, foundations, local businesses and financial institutions for a Corporate Impact Fund (CIF) in order to catalyse private capital flows into its development objectives.

While the model triggered cautious interest from the stakeholders, notably to strengthen their supply chains, it was generally agreed that a bottom-up approach to selecting financing models tailored to specific needs in a given sector/geography is preferred. USAID is now using those insights to create larger-scale impact in developing countries.

Mapping of identified CSR investment models from impact-first to finance-first, and selection of example companies applying these models.

Impact first

Corporate foundations

Channels for distribution of corporations’ profits into non-profit.

Examples:

Strategic collaborations

Platforms for corporations to offer financial and non-financial support.

Examples:

Pay-for- performance mechanisms

Funds in which investors receive results-based returns, conditional on achieving impact.

Examples:

Impact investment funds

Funds investing in projects with both societal and financial returns.

Examples:

Corporate impact funds

Co-guarantee model, based on corporations’ CSR funding as first- loss tranche, channelling patient capital to local impactful businesses.

Examples:

Lending initiatives to Micro, Small & Medium Enterprises (MSMEs)

Funds providing affordable loans through lending partners to MSMEs.

Examples:

Social business units

Corporate unit aiming to resolve a social/environmental issues via a commercial approach.

Examples:

Incubators and accelerators

Platform helping start-ups to develop by providing various services.

Examples:

Corporate venture funds

Investments into innovative start- ups related to the company’s own industry.

Examples:

Finance first

Private businesses are increasingly seeing the opportunities of creating a lasting positive impact in developing countries. To effectively benefit the local economies while minimizing the corporate investor risks, innovative ways of working are needed. A collaboration with donor agencies such as USAID and the use of innovative finance mechanisms can bring great benefits to all actors.

Roman Kovac

Associate, KOIS Brussels

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