Q&A Oxfam and Impact Investments. Audience: Entrepreneurs Investors Oxfam + partners General audience (including press) General

Transcription

1 Q&A Oxfam and Impact Investments Audience: Entrepreneurs Investors Oxfam + partners General audience (including press) General Q: Why is Oxfam active in impact investing? A: Oxfam believes the upcoming SME sector in developing countries has the potential to contribute in a positive way to social change and can therefore help Oxfam realise its mission: a just world without poverty. Access to capital (investments) is one of the key determinants to enable SME development in developing countries. Q: What is Oxfam doing in the Impact Investing space? A: Oxfam is a confederation of 17 different Oxfam affiliates of which Oxfam America, Oxfam Great Britain, Oxfam Novib (Netherlands) and Intermon Oxfam (Spain) have initiated impact investing and SME development activities. The different affiliates together offer finance and business development services to SME in around 25 countries and coordinate their efforts and share lessons learned in an Oxfam wide community of practice. Next to building a strong portfolio of SMEs, Oxfam is developing its knowledge and experience in impact measurement and aims to contribute to a more enabling policy environment for SME development through its lobby activities at national and international level. Q: What is the Impact Investments fund specifically about? A: The fund intends to support entrepreneurs committed to achieve social impact while making financial returns in Africa and Asia. The fund aims to cover the full spectrum of the so called missing middle by dividing the SMEs in this spectrum in three categories (small, early growth and expansion) who are all serviced with finance and business development services tailored to their specific needs. The fund invests directly, through co-investments and through fund in fund structures. Q: Does the fund focus on specific sectors, regions? A: The fund invests in Africa and Asia primarily. The direct SME investments are mainly focussed in the countries Nigeria, Uganda and Vietnam. It will focus the majority of its investments in the agricultural sector (primarily in food production), ICT and Media and consumer products and services that have a positive effect on the lives of women, youth and small farmers living in poverty. To ensure sustainability the fund invests in local entrepreneurs. Q: How much money does Oxfam Novib put in the programme? A: In the period Oxfam Novib intends to invest in total Eur 8 million through loans and equity in SME s and Funds. Additionally Oxfam Novib invests another 1.5 million in business development, impact measurement and operational costs.

2 Q: Where does this money come from? A: Oxfam Novib has freed up the Eur 8 million from the repayment on loans in its Micro Finance Fund of Eur 47 million. The Eur 1.5 million comes from its own reserves. The money received from private donors is not used for the investment activities of the ON Impact Investment fund. Q: How does the Impact Investment fund relate to Oxfam s other Impact Investing activities (e.g. micro finance)? A: Oxfam Novib has almost 20 years of experience in Micro Finance and considers this as an important track record to build on in its current entry into the SME finance market. It will use its partnership with Triple Jump, local micro finance institutions and knowledge of realising impact through investments to support effective investments in SME. Other Oxfam affiliates (Oxfam Great Britain and Oxfam America) have also built up a track record in SME development and investing over the years with the WISE (Women in Small Enterprises), EDP (Enterprise Development Programme) and the Small Enterprise Impact Investing Fund (SEIIF). An Oxfam team at global level coordinates these activities so that both investors and SME will be offered the right support from the various funds that Oxfam operates. Oxfam is active in over 20 countries in the SME finance space. Investing in SME in these countries is part of Oxfam s country strategy and programme to improve the livelihoods of women and men living in poverty. Q: For the Impact Investments initiative specifically: How does the partnership with Triple Jump in this pilot phase look like? A: Triple Jump was founded by Oxfam Novib and has since then very effectively managed Oxfam Novib s Micro Finance Fund. The idea of the Oxfam Impact Investments initiative was developed in close collaboration with Triple Jump. Three million of the fund will be invested through local MFIs to reach out to small SMEs in close collaboration with Triple Jump. Oxfam Novib will use its own network on the ground to assess potential SMEs in the early growth and enterprise expansion phase and invest in them directly. Oxfam Novib is also leading on measuring the social impact of the investments in MFIs and SME done by Triple Jump and Oxfam Novib. Q: Are there any other partnerships involved? A: Oxfam will actively seek partnerships with other local funds, co-investors, business incubation and development organisations and specialists in impact measurement to ensure the highest possible quality and sustainability of its efforts. Q: Why a pilot and when is the pilot a success? A: Considering the fact that impact investing is quickly becoming a more crowded space, Oxfam Novib wants to make sure it has a valuable role to play. Oxfam Novib has therefore decided to first test the many assumptions underpinning the initiative in a two year pilot phase ( ). The pilot is a success when it delivers on planned results (particularly in relation to its partnerships with SME and other local actors and creating an interest from future investors). If expected results are not met, lessons learned are considered a valuable result in itself. Q: What is next after the pilot phase? A: If the board of Oxfam Novib decides to continue with its impact investing activities, the fund has the ambition to grow to a plus Eur 50 mln fund within a couple of years. Oxfam will always look into ways to combine finance with business development services, preferable

3 through partnerships with local organisations. Finally, Oxfam has the ambition to become a knowledge and expertise centre on impact measurement for donors and grant based foundations as well as investors and financial institutions. Q: Is Impact Investing going to replace Oxfam s grant based work? A: Oxfam will remain an organisation with many mandates. We are a worldwide influencing network lobbying and campaigning for a more just world without poverty. We will remain active in the humanitarian space and believe there are many activities that need structural developmental aid. Our Impact Investing work is an enrichment of our private sector work and is additional to our other work. We will strive to make it complementary by ensuring that our different interventions strengthen each other as much as possible. Impact First? Q: How important is the social impact of its investments for Oxfam, also compared to financial returns? A: Oxfam is an impact first investor, but a (expected) financial return on its investments is a condition. Being an impact first investor, Oxfam will strongly focus on supporting the entrepreneur to be specific about the social impact he or she expects its business to generate and will monitor this impact regularly. Q: How does Oxfam define social impact? A: Oxfam expects its investments to have a positive impact on the lives of small farmers, women and youth living in poverty. The SMEs in which Oxfam invests provide direct employment to farmers, women or youth living in poverty, and/or lead to income increases through an improved position in the supply chain of small farmers, women or youth and/or offer services or products to farmers, women or youth that improve their lives or that of their families. Q: How does Oxfam monitor and measure impact? A: Oxfam has developed its metrics system based on international impact investing frameworks (IRISANDE) and its own rights based approach to development. In setting the terms of the investment, a limited set of smart impact monitoring criteria are developed in close collaboration with the entrepreneur and taken up in the contract. Oxfam can and will support the entrepreneur if needed with training and support to strengthen his or her impact analysis. Oxfam Novib will do periodic (every three five years) impact evaluations of its specific investments and overall portfolio. Oxfam has built up some relevant experience in executing impact studies in its grants and microfinance portfolio that provide an important reference point for these evaluations. Q: How does Oxfam share its knowledge on impact measurement with other actors in the space? A: Oxfam actively participates in international debates (e.g. through its membership of ANDE and GIIN) on impact measurement in impact investing. In June 2014 it organised a conference on impact measurement in SME finance in Amsterdam, The Netherlands. Additionally, Oxfam offers its services in impact measurement to the market. Other investors, MFIs and SME have shown interest in Oxfam s impact studies and social due diligence services. For more information please contact impact@oxfamnovib.nl

4 Investments Q: How does Oxfam manage the risks related to investments in SME in Africa and Asia? A: Oxfam is diversifying its portfolio to manage risk. Although it focuses on SME that have most difficulty getting access to finance (the true missing middle), it deliberately balances out the risks of these investments with investments through other funds and investments in more established companies. Oxfam also invests strongly in partnerships and local staff expertise to manage the risks of its investments. However, Oxfam is aware of the high risk associated with investments in the missing middle, and sees it as its front runner role to deliberately take these risks. The expected social returns are the upside to the risks taken. Q: What are the main criteria Oxfam uses in the selection of its investments? A: Oxfam works with local entrepreneurs, who have invested their own resources in their business. Young entrepreneurs who have run their business for a few years and entrepreneurs with a track record that want to start a new business are both welcome. Oxfam looks for entrepreneurs with a social heart who are in need of an investment partner who offers more than finance and wants to truly engage with them to grow their business and improve the lives of people living in poverty at the same time. For more insight in Oxfam s criteria see... (link to specific page on the website to follow) Q: What is the average size of a loan or equity investment? A: Oxfam provides finance in the range from Eur (through financial intermediaries) to 1 million euro (directly). Its average direct investment size is expected to be Eur Q: What are the terms of investment Oxfam offers entrepreneurs? A: Oxfam offers flexible finance, determined on a case by case basis geared at growing the business of the entrepreneur. Oxfam provides both debt and equity. Oxfam needs to balance the liquidity of its portfolio but is not in there for the quick gain. The maturity of the loan/investment will be tailor made and can run up to 8 years (depending on assets to be financed and projected cash flows). Oxfam offers market conform interest rates on the loans it provides. Loans to local SME will be offered in local currency (if possible) and investments in Funds will be preferably made in Eur. The investments do not always require a collateral (depending on the SME characteristics and local context, in some cases collateral will not be asked in order to catalyse local working capital finance) Q: How long does Oxfam Novib generally take for the due diligence on potential investments? A: The due diligence process takes on average 3-6 months from first contact to signing the contract. Since the pilot has only started recently, the process is expected to take some more time in this first phase. Q: How does the process go and who finally decides on future investments? A: SME interested to work with Oxfam Novib can approach our country offices or head offices. Business advisors in specific countries will also actively look out for SME that could potentially benefit from Oxfam s services. There is a short intake phase (with a quick scan) done by our local business expert, followed by a more thorough due diligence process lead by our fund manager based in The Hague, the Netherlands.

5 Finally, the investment proposal is submitted for external advice to our investment committee. Q: Is Oxfam interested in co-investing, if yes under which conditions? A: Oxfam is interested in co-investing with other like-minded investors. It sees great opportunities in the complementarily that co-investing efforts can offer. Oxfam considers that it can contribute its local presence for monitoring purposes and knowledge of social impact measurement while benefiting from the experience of others in specific market knowledge and financial expertise. Q: Is Oxfam actively fundraising to attract other investors to its funds? A: Oxfam is actively fundraising for its different funds. Oxfam Novib is not actively fundraising yet in the pilot phase, but is exploring potential partnerships for the future. Any investor interested to work with Oxfam on its impact investing activities is very much invited to approach us. Q: Does Oxfam intent to make profit with its investments? A: Oxfam expects its investment activities to provide a modest return in order to cover costs and attract investors in the future that feel at home with Oxfam s impact first and financial sustainability profile. If returns are more than needed for cost recovery and returns to investors they will be re-invested in the fund. Q: What is the interest rate Oxfam charges on the loans it provides? A: Oxfam charges market based interest rates to enable the SME to access finance in its local market in the future. Oxfam is open to offering other flexible terms to enable the entrepreneur to grow its business in a sustainable way. Q; What makes Oxfam a different investor from banks or other investors? A: Oxfam truly wants to engage in a partnership with the entrepreneur, supporting him or her to grow the business and deliver on the social and financial impact agreed. It is in Oxfam s interest to be there for the long run, provide more than only capital and be open and flexible to act in the interest of the entrepreneur and his business. Oxfam intends to offer more than money. More than money? Q: What other services Oxfam provides than access to capital to entrepreneurs? A: Oxfam offers both business incubation and business development services. These services range from support in business planning to facilitating market research, business governance advice or linking SME to specific technical expertise. Oxfam has built and continues to build a network of expertise organisations that it can refer SME to. It has limited finance available to support SME to access the services of these organisations. Q: What are the conditions to apply for business incubation or development services? A: The business development services Oxfam provides are closely linked to its investment prospects. Oxfam expects the entrepreneur to invest in the business incubation or development services himself too. Options exist to include the costs of the services in the finance provided in a later stage.

6 Q: How can the entrepreneur benefit further from Oxfam s world wide network and outreach? A: Oxfam will invest in documenting its experiences and lessons learned on SME development, hoping these lessons will inspire others too. Additionally, Oxfam will actively lobby and campaign for policy change that leads to a more enabling environment for SME development in the countries it works and at international level. Finally.. Q: Who is the team running the Oxfam Impact Investments initiative? A: The team consists of local business expert staff in country (Nigeria, Uganda and Vietnam) and a small team with a mix of financial, business and developmental experience leading investments, impact measurement and the overall operations of the team from the Hague. For profiles and contact details of the staff, visit the Impact Investments website (