The Power of Impact Investment: a book review

The Rockefeller Foundation recently launched a book on impact investment. It is a good introduction to the emerging practice of using investment to create social impact while realizing financial returns.

Related concepts from Socially Responsible Investment (SRI), CSR & Corporate Shared Value, Venture Philanthropy, etc. are put into context with impact investment , especially on how these models are related or different from each other.

An overview of global situation is explored, from Africa to Asia (Thailand is mentioned several times although without any details though T_T )

The book provides lots of impact investment models and practices that are insightful and exciting.

My only two comments on the book are

1. Readers might misunderstood venture philanthropy as just grant support, from the discussion in the book it’s easy for people to misunderstood towards that direction. It’s important to emphasise that in venture philanthropy models, although the source of fund is grant, the use of fund can be quite mix of either grant, loan or equity. Many VP funds aim to attain capital preservation as well.

2. Examples of impact investment services are a bit too focused on American context. I’m sure later editions might include more European (which could be argued to be as developed as the US social investment industry) and others that are emerging.

Click here for the Book’s link

Kiva.org goes beyond MicroFiance

I’ve learned a lot from few Kiva people passing through Bangkok, they are responsible for experimental works to bring Kiva firmly into loan-based social investment area such as social enterprises and sustainable agriculture.

25560412-211341.jpgimage from http://www.johnelkington.com/

They seem to be experiment with both direct loan to social enterprises, working with intermediaries and forming innovative loan programs such as many they did in Africa with micro-loan program for small holder farmers to convert into sustainable farming methods in one small area and one family at a time. These examples are clearly making Kiva a pioneer in innovative and participative debt financing for emerging social enterprise movement globally.

I am truly inspired by the great possibility that Kiva might finally open up the slightly exclusive world of impact investment for the mass, similarly to how Kiva democratized micro finance industry. Of course Kiva.org is small compare to the whole micro finance industry but if one looks at the number of lenders, then Kiva truly create opportunities for public participation in a massive way. I hope the similar story might be coming into past for participative impact investment.

In this way, we might be seeing the rise of micro impact investors that might goes hand in hand with the growth of institutional and high net worth impact investors. This might allow the shift of the landscape whereby early stage social enterprises will gain access to a much border base of patient capital lenders. This will make the market situation much more healthy as many social enterprises will grow into a more sustainable pipeline for larger scale venture philanthropy and impact investors.

In fact, the rise of micro impact investors will address one of the biggest problem in social enterprise financing in Asia, i.e. the fact that most of social enterprises are still in very early stage and there is no real access to funding as the impact investment funds are not structured to get into this level of smaller deals. There are so much opportunities for partnership between Kiva and local social enterprise supporters across Asia.

This will compliment existing social investment market landscape and make it more robust, diverse and useful to real emerging social enterprises on the ground. I really hope our friends working on social enterprise incubators, intermediaries and investment funds will be able to work collaboratively with Kiva.org and similar platforms in making this great exciting opportunity real, at least in our home base, Asia!

Learn more about this great experiment at http://www.kiva.org/updates/kiva/2012/09/13/introducing-kivas-experimental.html