Published in July 2011
Note: This research document is a result of an ANDE-funded Capacity Development Fund grant.
This study by Santa Clara
University’s Center for Science, Technology and Society (CSTS), finds the need
to develop a more collaborative approach to deploying capital in the impact
investing space. The majority of the 45 organizations surveyed in the report ‘Coordinating
Impact Capital’ expressed an interest in linking with potential
co-investors to lower the risk associated with funding small and growing
businesses (SGBs) in developing countries.
The authors also find that nearly 60 percent of respondents used multiple
investment vehicles (grants, loans, convertible notes and equity) and 50
percent employed local intermediary organizations when making debt investments.
However, only 17 percent reported having used Capacity Development
Organizations (CDOs) to help their enterprises build management and systems
capacity, despite the potential benefits.
They recommend a syndicated approach of ‘phased investing’, in which two or
more investors provide capital during different phases of an SGB’s development,
to ensure a steady stream of capital to the enterprise. The authors also
suggest that equity may not be the most effective funding instrument for the
sector. Instead, the development of cash-flow based investment vehicles could
improve the predictability of returns and drive more mainstream capital into
The study was funded by the ANDE Capacity Development Fund 2010, and these
findings present an opportunity for ANDE to play a greater role in coordinating
the flow of impact capital and capacity development services to SGBs. The
report also suggests potential areas of future research on the impact of SGBs
on poverty and economic development, and identifying factors that lead to
greater social outcomes.