Impact investing: Putting down roots

Slowing economic growth and underperforming equity markets have seen the emergence of impact investing in underdeveloped regions. Vision interviews the management team at Dubai-based Willow Impact Investors about its efforts in providing capital, via the UAE, to social entrepreneurs and their businesses in East and Central African countries

Over at least the past three decades, the vast land that European explorers dubbed the Dark Continent has faced issues of mismanagement when it comes to foreign aid. Willow Impact Investors, an up and coming private equity fund registered in Luxembourg and with consulting offices in Dubai, Nairobi and New York, sees an urgent need for a new approach to help hundreds of millions of indigenous inhabitants of Africa’s many less-developed states emerge from grinding poverty – one based on trade, not aid; on constructive investment in small and medium-sized entrepreneurial enterprise rather than handouts to grasping bureaucracies.

For Willow’s Dubai-based management team – a close-knit group of graduates of INSEAD’s MBA programme who followed lucrative individual careers in international finance before coming together to set up the new social investment fund – this mission is a life-transforming passion.

Willow’s first crop of investments, from what it hopes will amount to US$80m of total capital, are likely to be Africa-focused

“We all left big jobs to do this,” says Managing Partner Nadine Kettaneh, a Lebanese and Irish national and graduate of the London School of Economics, whose previous career included a stint in investor relations with HSBC in Hong Kong and another directing the development of a London performing arts organisation.

Unconventional choices

Willow’s other Dubai managing partners have also made unconventional career choices. They include Pasha Bakhtiar, who most recently was Managing Director of the local office of Lombard Odier, a long-established Swiss private bank with more than US$150bn of assets under management worldwide. Bakhtiar’s leadership in the field of impact investing was recently recognised when he was named a Young Global Leader by the World Economic Forum.

Then there is Nic Farah, raised in Sudan, whose 20-year career in financial and management consulting with leading international firms and chartered banks has taken him to the UK, Lebanon, South Africa, Angola and the UAE.
To all three, the mismatch between Africa’s rich natural, agricultural and human resources and the impoverished lives of the majority of its people is not just a glaring humanitarian wrong in need of righting, but an investment opportunity.

“We believe that deploying capital in a creative and innovative manner can have a measurable and sustainable impact on people and the planet while also being profitable,” Willow says in its mission statement. “We invest with purpose to support sustainable, scalable and profitable businesses that have a tangible positive impact on the communities and environments that they serve.

“We empower people, be they investors or entrepreneurs, who recognise that it is both possible and necessary to achieve more than just financial return.”

Building on foundations

Willow is just at the start of its journey. Founded in 2011, its managers spent a year laying the groundwork, on the one hand with investors in Europe, North America and the Middle East, and with policy drivers including the Rockefeller Foundation in the US; on the other with communities and other stakeholders in a number of East and Central African countries as well as the Middle East. This year will be spent identifying specific businesses and projects that could have a significant local impact if transformed by a timely capital injection, and on making the first such investments.

The fund’s unique geographical focus includes a north-south swathe of sub-Saharan Africa from Ethiopia to Mozambique. A second focus area lies within the Middle East, encompassing Egypt, Lebanon, Jordan and Iraq. But Willow’s first crop of investments, from what it hopes will amount to US$80m of total capital, are likely to be Africa-focused and in projects that are all about helping people improve their living conditions in social environments poorly served by basic infrastructure.

One venture under serious consideration for funding is a water-purification project in Uganda and another, more basic project that Willow is considering in Ethiopia is to introduce and market reliable, advanced-biofuel cooking stoves through an initiative supported by extensive community consultation.

Impact investing targeting mid-sized businesses with the scope to maintain factories, distribution and servicing networks, and to harness new international funding sources linked to global climate-change mitigation, would be more effective than previous models in ensuring the success of such projects, Kettaneh suggests. But in Africa at least, this crucial mid-sized business sector has largely fallen through the cracks of well-intentioned aid initiatives, leaving would-be entrepreneurs facing crippling costs for the little traditional bank – and other debt-financing available to them.

Entrepreneurial community

Farah sees Willow’s Dubai location as essential to the fund’s efforts to put equity investors from the developed world together with African and MENA-region entrepreneurs. Typically, the latter are between 20 and 40 years old, have often been educated overseas and are interested in using business acumen to improve social conditions in their home countries.

Dubai is important to this emerging entrepreneurial community because of its long-standing trade and cultural links with both Africa and South Asia, the outward-looking financial services sector that has developed as a result and its recent emergence as a hub for air transportation and merchant shipping.

“People are travelling through Dubai regularly, and will stop here en route to somewhere else. They will come and see us here because it’s convenient,” Farah notes.

Kettaneh sees Willow as a long-term presence in the Gulf region, Africa and less developed parts of the Middle East.