As large corporations become increasingly aware of and intent on generating shared value, there are tremendous potential synergies with impact investors. The impact investing industry has the potential to solve some of the world’s biggest problems but is still in its infancy. According to JP Morgan Chase, 125 impact investment funds had committed US$12.7BN in 2014. While this is impressive, it’s a drop in the bucket compared to the size of global gaps in health, education, energy and financial inclusion. The financial inclusion gap alone is an estimated US$2 trillion. That’s why partnerships with large corporations can be extremely helpful. Firstly, large corporations have access to even larger pools of capital. Global corporate venture capital was estimated at over US$19BN in 2013. Additionally, large corporations have massive expertise, rigorous systems and very useful market-oriented intellectual property. This means they can add value to social enterprises in so many ways. Finally, they have distribution systems and market access-another key component of scalable growth. At GroFin, we have experienced these synergies firsthand in partnering with Shell Petroleum Development Company [SPDC]. A subsidiary of Royal Dutch Shell, SPDC is a leader of the petroleum industry in Nigeria, producing some 39 per cent of the nation’s oil.
SPDC’s operations are concentrated in the Niger Delta, a region that faces tremendous development challenges. The region has historically been fraught with instability, including high levels of criminality and terrorism. Regional unemployment in the Niger Delta is the highest in Nigeria (especially among young people and women). The oil and gas industries alone cannot create enough jobs for the region’s unemployed youth, generating enough employment requires a diversified and thriving private sector.
Developing the region’s start-ups, as well as smalls and growing businesses is the most direct path to broad-based job creation and equitable economic growth in the Niger Delta by. In developed markets, these businesses contribute over 60–70% of employment and more than 50% of growth. In emerging markets, by contrast, traditional investors (e.g. banks) overlook startup and early-stage businesses due to the high rates of failure and the high levels of support required to mitigate these risks. Almost 70% of small and growing businesses in Africa lack adequate access to capital and the problem is likely worse in Nigeria, where 80% of the population is already unbanked.
That is why, GroFin and SPDC joined forces to launch the Aspire Small Business Fund and the Aspire Growth Fund, two pioneering regional initiatives in the Niger Delta. Aspire targets the small and growing businesses at the base of the SME pyramid. These businesses are the principal employers for many low-income communities. Unlike micro-enterprises, these businesses transcend self-employment and actually create more viable and sustained jobs. Yet these businesses are also more likely than large companies to have a presence within the most vulnerable communities. However, these companies are too large for microfinance, too small for traditional private equity and too high-risk for banks due to a lack of collateral and/or track record.
Both Aspire funds provide the GroFin signature integrated solution designed to addresses the core challenges that entrepreneurs and business owners face.
Aspire aims to invest in 200 of these businesses in the Niger Delta while delivering invaluable business counsel to many more. These investments aim to create over 2,400 sustainable jobs by 2018. Moreover, they will improve an estimated 14,000 livelihoods, bit by bit expanding possibilities for prosperity and stability in the Niger Delta.
The first GroFin Aspire Small Business Fund made its first investment in Dezionite, a female-owned business that grew out of the SPDC Live-Wire training. Mercy Ikeji the entrepreneur behind Dezionite realized the potential for a business that provides interior design and commercial cleaning services.