September 24, 2017

Impacting lives through social Entrepreneurship

By: Biko Rading

Nairobi has just been ranked 21 best city in Africa and 184 globally according to a study conducted by Mercer , a consulting firm .As per their recently published 18th Quality of Living Survey, which ranks 230 cities they believe provide the best quality of life.

Over 440 cities, and based on a certain criteria, Mercer then decides which 230 make the cut. The cities are chosen and ranked according to a variety of factors, such as the political and social environment, economic conditions, education, and public services.

Kenya entrepreneurs on the other hand have always been encouraged to be social entrepreneurs as a way of creating a better society in Kenya.

According to   a report by the U.K. Department for International Development (DFID), nearly $10 billion in impact-investment funds have flowed into East Africa.

The   Global Impact Investing Network (GIIN) and Open Capital Advisors, reveals that Nairobi is the biggest recipient s of this funding and the base for many of the managers handling it, the report says, with about half of the $9.3 billion invested in Kenya. Neighboring Uganda and Tanzania receive 13% and 12% of the pie respectively. Ethiopia is trailing at 7% of the total.

Nairobi alone is home to dozens of such funds, often co-financed by state aid agencies from developed countries, and private-sector players, such as major Western banks.

Kenya will stay at the forefront of this type of investment in future, the report says, in part because of its better-educated workforce and relatively open markets. Still, the positive financial outcomes of impact funding—in the profitability sense are yet to be seen broadly, as few funds have successfully exited investments, the report notes.

It also says many potential target companies are not yet ready for investment, and that there is a dearth of senior talent and limited bank lending for smaller companies, making investing in the region challenging.

The report notes, however, that the overwhelming majority of the $9.3 billion total comes from Development Finance Institutions (DFIs), organizations such as the World Bank that have traditionally dominated the financing space in the developing world. Only $1.4 billion of the total comes from funds that aren’t related to DFIs, a sign that, while the impact-investment world is gathering pace, it’s still dominated by traditional sources of funding.

Chief executive of GIIN  Amit Bouri, noted that East Africa is generating a great deal of excitement among impact investors and the key problems they’re facing aren’t unique to these investors but affect small and medium-sized enterprises more generally.

These smaller firms struggle with access to financing and are vulnerable to slumps in growth or other events that can influence the environment in which they operate.

“There’s a tremendous potential for socially and environmentally focused businesses in East Africa,” Bouri told the Wall Street Journal. “That said, it’s hard work, just as all investing is tough.”

The sector attracting most interest is financial services, which accounts for almost 30% of capital disbursed. Other sectors getting attention include agriculture, energy, tourism and fast-moving consumer goods essentially those that stand to benefit from the ballooning middle class in Kenya and beyond.

 

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