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The Benefits of Impact Investing in Education for Poverty Alleviation

Investing in EducationImpact investing is an investment strategy employed by individuals, companies or organizations seeking both financial returns and a positive social or environmental impact. This approach, when applied to education, could yield substantial benefits for individuals and developing countries alike. Education has the potential to enhance various facets of an economy, including health, empowerment and employment, as highlighted by EHL Insights. For instance, research suggests that achieving universal education, where every child acquires basic literacy skills, could reduce the number of individuals living in poverty by an estimated 170 million.

Reducing the Funding Gap

The private sector can significantly assist governments in developing countries in closing the funding gap and providing access to quality education for all children in these nations. This support is crucial as many developing countries face challenges in securing the financial resources required for universal basic education of high quality.

According to LEK Consulting, developing countries will need an expenditure of $3 trillion on education to provide “universal access to education” by 2030, which aligns with the sustainable development goals (SDG). This is more than double the 2020 expenditure of $1.2 trillion. The benefits of impact investing in education from the private sector can potentially fill in the gaps where government funding is absent or limited – improving issues of low access to education and low learning outcomes, both of which have implications for poverty alleviation in developing countries.

Impact Investing Improves Access to Education

Hewlett-Packard (HP) launched HP School Cloud, an open learning platform, in 2018 to help improve access to education via a $20 million investment. HP school clouds allow access to educational materials such as e-textbooks and thousands of lessons in STEM subjects like science and math without the need for the internet, allowing equitable access to education worldwide, particularly helping the most marginalized in society. The resources are aligned with an international curriculum standard set by UNESCO and OECD to name a few, with the aim of improving education for 100 million people by 2025. HP School Cloud is an important tool for accessing education. Ron Coughlin, President of Personal Systems Business at HP, states, “HP School Cloud ensures today’s aspiring students develop the skills for the jobs of tomorrow.”

Education is still the primary way for people to escape cyclical poverty in developing countries. Therefore, impact investing can help to improve access to education and help promote a better future by increasing employment status, generational wealth and income and wealth creation. The World Bank states that globally for every year of schooling, there is a “9% increase in hourly earnings.” This increase in earnings in turn contributes to the economic growth of a country. No country with adult literacy rates below 40% achieves rapid growth, demonstrating the importance of access to education for poverty alleviation.

Impact Investing Improves Learning Outcomes

The Union Bank of Switzerland (UBS) Optimus Foundation created the first Development Impact Bond (DIB) in education, Educate Girls DIB, in 2015 to increase the enrolment of marginalized girls and progress and improve literacy and numeracy among children who attended school, in the Indian State of Rajasthan. The DIB lasted three years until 2018. At the end of the program, the learning outcomes of enrollees “grew 79% more than their peers in other schools,” according to the Educate Girls Foundation. That is equivalent to an additional year of education.

Children need foundational knowledge that they learn in school to help them develop as individuals and thrive when they join the workforce. Improving low learning outcomes, particularly for women, can help build prosperous and healthy families. The benefits of impact investing in education in developing countries are likely to reduce children’s malnutrition by 50%, reduce the chances of children dying before the age of 5 and reduce their chances of turning to prostitution as a source of income, consequently reducing levels of HIV infection within a country.

Impact investing in education can help reduce poverty within developing countries by providing large amounts of funding in places where government resources are spread thin. Education is important for reducing poverty. Education increases economic growth and individual earnings, which benefit families and wider society. Furthermore, investing in education, particularly for women, leads to better health outcomes creating a healthier society.

– Kishan Patel
Photo: Flickr

BlueOrchard: Transforming lives Through Impact Investing

BlueOrchard Transforming lives Through Impact InvestingFounded in 2001, BlueOrchard is a leading impact investment firm that specializes in supporting microfinance institutions and organizations that promote financial inclusion and reduce poverty around the world. Since its creation, BlueOrchard has invested $8 billion in more than 90 countries and has contributed to transforming the lives of more than 250 million people.

Impact Investing

Impact investing is a form of investing that seeks to create measurable social and environmental impact and financial profit. While traditional forms of investing often focus only on increasing profits, impact investing strives to inspire positive change in the world while also producing financial returns for investors. Impact investing takes many different forms. These include investing in microfinance institutions that provide small loans to entrepreneurs in developing countries, investing in renewable energy projects to fight climate change, investing in affordable housing companies, investing in education providers and much more.

Making a Difference

BlueOrchard’s mission is to promote financial inclusion for neglected communities and environments while simultaneously providing financial returns for investors by linking them to entrepreneurs around the world. One of the major impacts of this goal is poverty alleviation. BlueOrchard invests in a wide range of projects including providing loans to small businesses, renewable energy projects and educational centers.

BlueOrchard’s primary impact investments focus on supporting microfinance institutions (MFIs) that provide small loans to entrepreneurs in developing countries. These loans can help people
kickstart or expand their businesses, which can create a sustainable livelihood for those living in abject poverty. BlueOrchard has invested in many MFIs around the world, including the Asian Development Bank’s (ADB) microfinance program which targets reducing poverty and water sanitation projects and FINCA Impact Finance which focuses on helping women in Central and South America, sub-Saharan Africa and Eurasia.

Investments

It has also invested in MFIs that target diminishing gender disparities such as Japan’s ASEAN Women’s Empowerment Fund and Sonata Finance in India. This initiative provides loans to disadvantaged women across India. BlueOrchard also invests in education projects, and one example is the Regional Education Finance Fund for Africa (REFFA) which aims to improve access to primary, secondary and higher education across Africa.

Climate finance is another target area for BlueOrchard. It has created a climate insurance fund called InsuResilience Investment Fund (IIF) that has benefitted impoverished populations most vulnerable to weather volatility and climate change in developing countries. The organization also invests in renewable energy projects in India, helping to provide clean and affordable energy products, such as solar-powered sustainable lighting, that can stimulate social and economic development in the country.

By covering such a vast array of investment projects, BlueOrchard contributes to helping the United Nations meet 16 of the 17 Sustainable Development Goals (SDGs).

The Impact of BlueOrchard’s Investments

BlueOrchard’s impact investments have had a monumental impact on global poverty reduction. As of June 2021, the organization had provided financial services to more than 39 million people around the world. It has helped create and sustain more than 156 million jobs and has provided climate insurance to 25 million people. The organization has impacted some of the world’s most vulnerable populations including impoverished people, displaced people and refugees.

BlueOrchard is a leading global impact investment firm that is making a remarkable difference in the fight against poverty around the world. Through its investments in multiple sustainable development sectors including agriculture, gender inequality and renewable energy, it continues to demonstrate that financial profit and global change are not mutually exclusive ideas and can merge to create lasting change.

– Aemal Nafis
Photo: Flickr

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AgDevCo: Impact Investing in Rwanda

Impact Investing in RwandaImpact investing is a growing industry with huge potential for combatting poverty around the world. The practice consists of firms and individuals directing capital to businesses and enterprises that have the capacity to generate social or environmental benefits. Traditional businesses tend to avoid such investments due to the high level of risk, low liquidity and general difficulty to exit if returns are not satisfactory. Most impact investing is done by particularly adventurous capitalists as well as nongovernmental organizations (NGOs) that aim to create social change. Impact investing in Rwanda, in particular, has yielded positive results.

AgDevCo

AgDevCo is an example of a social impact investing firm that aims to invest with the intention of reducing poverty and increasing opportunity in developing regions. Based in the United Kingdom, AgDevCo was incorporated in 2009 and has engaged in numerous projects since.

The firm’s specific area of investment is in African agriculture, where it believes that impactful investments have the potential to be a significant force in reducing poverty. The firm is currently investing in eight different African countries. Its portfolio includes $135 million worth of funds in 50 different companies. These investments have engaged more than 526,000 customers and have created or sustained more than 15,000 different jobs.

Uzima Chicken Limited

One of its investment projects is a partnership with the East African poultry company, Uzima Chicken Limited. Uzima Chicken produces and distributes the Sasso breed of chickens. Sasso chickens are resistant to disease and can feed through scavenging. These beneficial traits make Sasso chickens particularly useful in the struggle to reduce poverty in East Africa.

In 2017, AgDevCo invested $3 million to support Uzima’s establishment in Rwanda. As a result of the investment, Uzima gained funds necessary for rapid operational growth as a domestic producer of poultry. This is in line with the government of Rwanda’s strategy to achieve poultry self-sufficiency in two to three years. Uzima has also been able to expand into Uganda, where its business is rapidly scaling upwards.

The Uzima Business Model

The Uzima model of business involves the employment of company agents who raise the chicks for six to eight weeks before selling them to low-income households in rural areas. Such a model provides benefits to farmers, who can increase income through the sale of the more valuable Sasso chickens, as well as the agents.

Agents typically make a 25% profit from selling chickens. A survey of Uzima agents found that, on average, 27% of household income came from selling Sasso chickens. By providing a reliable source of extra income for employed agents, Uzima helps to alleviate the burdens of poverty for these people. As of 2017, the efforts had created 150 new jobs, 40% of which are held by women. Rwandan women have benefitted significantly from Uzima’s employment with 64% of women agents reporting that the income they earned from selling Sasso chickens led to a positive change in the decision-making power they had in their households.

Impact Investments for Poverty Reduction

Uzima’s Sasso chickens grow faster, live longer, produce more eggs and have higher market prices. They are disease-resistant and thrive in local, rural conditions. Out of all the customers buying these chickens, 54% live below the $2.50 poverty line. AgDevCo investment gave Uzima the capital necessary for operational expansion, and as a result, a greater quantity of impoverished people in East Africa could buy superior chickens and increase income. Uzima’s business also has clear potential for women’s empowerment, making it a great tool in the effort to reduce poverty and inequality in the region.

The impact investments made by firms like AgDevCo have clearly measurable impacts in impoverished regions, particularly noting the success of impact investing in Rwanda. This makes impact investment firms an important part of the global effort to reduce all poverty.

– Haroun Siddiqui
Photo: Flickr

How Impact Investing Can Change the World

Impacting Investing
Investing in the right organizations has the potential to change the world. Impact investing is a type of investment that focuses on social or environmental benefits as well as financial or capital returns. Impact investing can be done through for-profit or nonprofit organizations that are looking to improve the world. It can be done in emerging or developed markets anywhere in the world as part of a growing market that provides capital to address global issues in sectors like “sustainable agriculture, renewable energy, conservation, microfinance and affordable and accessible basic services including housing, healthcare and education,” as the Global Impact Investing Network (GIIN) says. The market is estimated to be at around $502 billion as of April 2019.

According to GIIN, there are four primary characteristics of impact investing:

  1. Intentionality – The intention is one of the main things that differentiates impact investing from regular investing. The intention behind impact investing must be the desire to create measurable social or environmental benefits.
  2. Use evidence and impact data in investment design – Investments must have evidence or data that indicates the investment will have social or environmental benefits.
  3. Manage impact performance – Investments must be managed toward the specific intention of the investment. This would mean having feedback loops and means of communicating performance information to ensure that the investment is working toward the intention of the investment.
  4. Contribute to the growth of the industry – Impact investors must use shared industry terms to communicate their goals, strategy and growth. They also share information so that others may learn from their experience and adjust their investments accordingly.

Examples of Impact Investments

  • The Omidyar Network – Pierre Omidyar, the founder of eBay, and his wife Pam obtained large quantities of wealth after the company went public and wanted to do some good with it. He set up a limited liability company (LLC) to make investments in early-stage innovations that are able to generate profits. He also set up a 501(c)3, a tax-exempt nonprofit, to provide grants for public goods and assistance to disadvantaged communities as well as subsidize the production of beneficial goods. The use of both of these allows the Omidyar Network to use for-profit capital and nonprofit grants to benefit society.
  • Actiam Impact Investing – Actiam Impact Investing invested in Pro Mujer Bolivia, an organization that provides training and financial services to women in Bolivia. Janeth Villegas is one of many women who benefited from the program. Pro Mujer taught Villegas a number of skills including accounting and business management which empowered her to start her own chocolate company that she is now teaching her kids to run.
  • Salkhit Wind Farm – Impact investors invested capital in Salkhit Windfarm, the first renewable energy generator connected to the central grid in Ulaanbaatar, Mongolia. The installation of this wind farm has reduced coal burning by 122,000 tons annually and has created over 3,000 local jobs.
  • General Electric – General Electric (GE) provides impact capital through its Ecomagination Accelerator to finance energy conservation efforts. Ecomagination investments totaled $1.4 billion in 2014. “We want to inspire more companies to work together and tackle the world’s greatest resource problems,” Ecomagination’s global executive director Deb Frodl said. With this goal in mind, the company also aims to decrease reliance on fossil fuels in order to reduce greenhouse gas emissions.
  • d.light – This for-profit company invests in and manufactures solar energy and distributes its products through the developing world. d.light’s mission is “To create a brighter future by making clean energy products universally available and affordable.” The focus here is on providing clean energy to the developing world which helps reduce dependence on fossil fuels and provides electricity to people who might not otherwise have it.

– Sarah Faure
Photo: Wikimedia Commons

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What is Impact Investing?


In the preface to their annual letter to investment magnate Warren Buffet, Bill and Melinda Gates wrote, “The best investment any of us can ever make is in the lives of others.” Unlike the Gateses and Buffet, the average person does not have billions of dollars at his/her disposal to invest in the betterment of mankind. However, with the rise of impact investing, more people can invest their money in ways that are financially and socially beneficial.

The term “impact investing” first arose less than a decade ago and has been defined by the Global Impact Investing Network as “[investing] made into companies, organizations, and funds with the intention to generate measurable social and environmental impact alongside a financial return.” While the social good targeted by impact investors can be varied, several social venture capital firms are focused on the world’s poor. Among them are the Acumen Fund, Gray Ghost Ventures and Root Capital.

The Acumen Fund invests in companies with the potential for social impact in Africa, India and Pakistan. In India, Acumen successfully partnered with WaterHealth International to bring clean water to rural areas. Acumen helped WHI expand from two water systems to over 500 all over the globe. WaterHealth International’s systems now provide safe drinking water to over five million people.

Gray Ghost Ventures began with a focus on microfinancing but has since become a pioneer in impact investing. GGV aims to improve the lives of the underserved in emerging markets by investing in technology and financial services companies. Since 2003, it has invested more than $125 million in businesses that have helped to alleviate poverty and expand access to quality education. To improve access to education, Gray Ghost ventures established the Indian School Finance Company in Hyderabad, India. The company provides loans to credit-worthy private schools in order to improve infrastructure and increase enrollment.

Root Capital was established with a mission to grow rural prosperity by investing in agricultural businesses. Since 1999, it has distributed over $1 billion dollars in loans and reached more than five million household members. The businesses that have benefited from Root Capital’s impact investing have generated $6 billion in revenue.

While every investment in the lives of others is worthwhile, impact investing provides financial returns for altruism. Rather than simply providing handouts, impact investors can empower the global poor to positively influence their communities.

– Rebecca Yu

Photo: Flickr

How Corporations Fight Poverty

Corporations Fight Poverty
Private companies recently have been making global poverty a priority, squeezing their way into the realm where charities and governments once operated alone. Corporations fight poverty on a much larger scale and with greater resources. 

Western countries like Britain and the United States, as well as Australia and other countries, have started to put their faith in the private sector to develop economies and alleviate global poverty. IKEA is the largest donor to the United Nations refugee agency.

“There must be a major role for the private sector in the development sphere,” Julie Bishop, Foreign Minister of Australia, stated a few weeks ago. She said that a sturdy private sector promotes more jobs and growth and helps to reduce global poverty.

Private individuals, especially those who are wealthy, can play a large role in reducing global poverty through impact investment and philanthropy.

“The profit motive is viewed by many to implicitly mean ‘exploitation’. But that is not necessarily the case,” says Mark Ingram, owner of Business for Millennium Development, an organization that links big corporations with small markets in developing countries. “Business engagement with the poor can be designed with intentional mutual benefit.”

Impact investing, which is investing in socially responsible offers, funds poverty alleviation efforts and other social projects that may not be funded otherwise.

Impact investing needs to offer incentives to potential clients if it wants to encourage global poverty reduction. Mark Haefele, global chief investment officer at UBS Wealth Management, suggests using stronger policy and tax incentives, education-related initiative and social impact bonds.

Considering how much wealth is concentrated among individuals, the scale of poverty-related philanthropy will probably increase in the next years. Haefele also points out that corporations need to recognize that attempts to fight global poverty are more effective when funds are invested sustainably, and when they partner with other corporations or the government.

Banks also play an intermediate role between capital and social programs that can help alleviate global poverty.

As long as investors’ standards continue to shift towards reducing global poverty, the fight against poverty will strengthen even more as social and financial profits become more aligned with each other. At this point, no investor will be able to afford to ignore socially responsible investing.

– Colleen Moore

Sources: Sydney Morning Herald, FTAlphaville
Photo: Foreign Policy

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How Do We End Global Poverty?

How to end global poverty
Putting an end to global poverty seems like a huge undertaking, but the world is making itself a better place every single day.

There is no one set way to end global poverty, and it definitely will not be happening overnight. However, so many people and organizations have already taken strides in order to make things better.

When many consider global poverty they think of commercials in which a man comes out and says, “With just a dollar a day you could save this young child’s life.” But global poverty is so much more than that.

There is a lot more work involved, for one, and there are a lot more people that need help. Those children in that commercial are just one facet of what global poverty really is.

So, how do we end global poverty? The answer is different for everyone. Perhaps, the question to ask is: “What am I good at?” and then find a way to turn talents into something that can be good for everyone around the world.

There are hundreds if not thousands of ways people, charities and politicians around the world are trying to help impoverished nations.

There are people who make billboards that can use humidity and rainwater to create freshwater for the surrounding people, or buildings that use special concrete to suck up air pollution, or even the smallest thing such as the “donate now” button from PayPal.

There are business tycoons that use impact investing to help companies that want to give lanterns to children in Africa so they can do their homework and learn by accelerating investments in the solar lighting industry.

In addition to impact investing, there are also businesses like Domino’s Pizza, Kentucky Fried Chicken and Wal-Mart that have expanded in the African Markets bringing jobs, food and have even created advocacy and buzz to help provide donations to the impoverished peoples near their companies.

There are numerous nonprofits and charities dedicated to advocacy, food collection, shoe donation, vaccine donation and more. Nothing But Nets is one that’s as simple as giving a family in Africa an insecticide-treated mosquito net to help prevent the spread of malaria. Even the smallest things can impact global poverty in a big way.

There are even charities like Girl Up, dedicated to simply telling young girls and boys they can get through it and become better. Global poverty can be impacted by something as simple as positive encouragement.

The question “How do we end global poverty?” may seem intimidating at first, but once you decide what you can do and see what everyone else is already doing, it seems a lot easier.

The goal of ending global poverty is attainable, all it takes is asking yourself two simple questions: “What am I good at?” and “How can it help end global poverty?”

– Cara Morgan

Sources: The Borgen Project, Girl Up, Nothing But Nets, Shot@Life, Wal-Mart
Photo: World Relief

Crowdfunding Pushes Philanthropy and Development

Crowdfunding Pushes Philanthropy and Development

Crowdfunding is an approach to raising money for new projects and businesses by soliciting contributions from large numbers of ordinary people – online. In 2011 alone, this industry raised $1.5 billion dollars, both in for-profit and non-profit ventures. Due to new regulations, some estimate the trend could grow to $500 billion annually. This could mean huge changes and development through social-venture enterprises; more start-ups and funding for projects that have a beneficial social impact.

The money raised through crowdfunding falls into three different categories: 1. Philanthropy, where there is no expected return for the donation, 2. Lending, where the money is paid back, or some other gift (usually the business product) is given as a reward, or 3. Investment, in exchange for profit or revenue sharing (equity).

Much to industry surprise, the category that received the most funding was philanthropic which equaled 49 percent of all funds raised; despite the fact that most funding sites are for lending or investing.  A few sites, like Crowdrise.com and Causes.com, are exclusively for 501 registered charities. North America is the largest contributor, $837.2 million, over half of the global total, and also the fastest-growing region.

The dramatic news is that earlier this year new legislation was submitted to the SEC, allowing for even greater investment to be made through crowdfunding. So, if the current trends prevail, projects benefiting social causes could start to receive massive amounts of capital. The average equity-based campaign is aiming to raise about $85,000, compared to just $700 for donations. When the new regulations are approved, more funding is expected to flood into “impact investing.”

Jonathan Blanchard, founder of WeSparkt a crowdfunding platform focusing on social-entrepreneurship, believes investing will start to focus on a “double bottom line – profit and social good – to raise equity.” Blanchard sites a Monitor study suggesting that crowdfunding will reach $500 billion annually.  His site will target impact investors hoping to create social change.

You can participate right now, get in with the crowd – fund a project for the global poor!

– Mary Purcell

Source: Forbes, Forbes
Photo: Hong Kiat