From 17 to 20 October 2022, the 3rd edition of the International Finance in Common Summit was held. It was a first in Africa, to bring together so many policy makers, investors, bankers, financial institutions and sustainability experts to discuss the challenges and opportunities related to financing the green and inclusive transition in Africa. This was an opportunity for us to exchange with Impact Investing players and at the same time return to the challenges related to this booming sector in the world and especially on the continent. After all, Solidarity Microfinance has been an Impact investor since its creation in 2010 and even more so today in the perspective of our 2023-2026 development plan to develop our partnerships in Africa. This business development goes of course with fundraising to support our objectives and ambitions. 

The Finance in Common Summit is a succession of conferences co-organized by two of the main multilateral development banks (MDBs), the African Development Bank (AfDB) and the European Investment Bank (EIB). Discussions covered a variety of topics, including mobilizing public and private finance to support Africa's green and inclusive transition, putting in place regulatory frameworks to promote sustainable investments, and public-private collaboration to accelerate the transition. Participants also discussed examples of impact projects in Africa, such as renewable energy, waste management, sustainable agriculture and access to safe drinking water.

On the sidelines of the summit, we participated in a series of workshops and conferences organized by Fair, GSG and AFD on the theme: ' Joining forces: growing impact in Africa & beyond' on 18 October. From a practical point of view, this event, which took place ahead of the main summit, allowed us to exchange in a more intimate setting on concrete solutions to finance the Sustainable Development Goals (SDGs).

This article will thus return to a presentation of Impact Financing in Africa, in the context of the Finance in Common summit, a third edition focused on the African challenges of "impact investing".

From left to right, J.Afetor (Director IMF Assilassimé Togo) F. Renaudin (Founder Entrepreneurs du Monde) Levasseur (SIDI), Ouedraogo (IMF Director, UBTEC Burkina Faso), R. Rahimou (Solidarity Microfinance Investment Officer)

  1. Impact Financing in Africa: State of Play

Impact investing is a form of investment that aims to generate a positive social and environmental impact, in addition to a moderate financial return. Rates of return tend to fall and settle between the market rate and slightly below, usually between 13% and 17% against expectations of 20% to 23%. In Africa, the impact investing market is growing, owing to the many financing needs in key sectors such as agriculture, education, health, renewable energy and financial inclusion. Today, many actors are involved in impact finance in Africa. These include institutional investors, foundations, family offices, individual investors and governments. Investors can invest directly in impact projects in Africa or through impact investment funds that are dedicated to the region. Impact investing funds in Africa are typically managed by asset management firms that specialize in impact investing. 

  1. The characteristics of the African impact investing market

The impact investing market in Africa is still developing, but it is constantly growing. Indeed, according to the "African Investing for Impact Barometer" report published in 2021, the impact investing market in Africa reached $2.1 billion in 2020, registering an increase of 43% compared to the previous year. This type of investment is becoming increasingly popular around the world, including in Africa. The African impact investing market is booming. According to the Global Impact Investing Network (GIIN), impact investing in Africa has increased dramatically in recent years, from $2.3 billion in 2015 to $8.2 billion in 2019. Since 2020, despite the COVID-19 pandemic, the impact investing market in Africa has continued to grow. 

The characteristics of the African impact investing market are as follows:

  1. The African impact investing market is relatively young, but growing rapidly. It is composed of institutional investors, foundations, family offices, individual investors and venture capital funds, which invest in companies with social and/or environmental impact.
  2. Impact investors in Africa tend to focus on sectors such as renewable energy, sustainable agriculture, health, education, inclusive finance and information and communication technology (ICT).
  3. Projects funded by impact investors in Africa are often social enterprises or startups that have a positive impact on local communities and/or the environment.

Finally, it should be noted that impact investing in Africa is not without risks. Impact investors face political, regulatory, economic, social, sector- or project-specific risks. Nevertheless, impact finance in Africa offers great opportunities for impact investors looking to achieve positive social or environmental impact while achieving financial returns.

  1. Actors involved in financing, impact investing in Africa

The actors involved in impact finance in Africa are diverse, including impact investors, social entrepreneurs, social entrepreneurship support organizations, NGOs, governments and international donors. Impact investors in Africa have also created networks to share knowledge, best practices and investment opportunities, such as the African Venture Philanthropy Alliance and the African Impact Investing Network.

  1. Investors are one of the key players in impact finance in Africa. They can be institutional investors, such as pension funds and sovereign wealth funds, or private investors, such as family offices and philanthropists. Impact investors are investors who seek financial returns while having a positive social and environmental impact. They can invest directly in social enterprises or impact projects, or through impact investment funds.
  2. Financial institutions are also important players in impact finance in Africa. Banks, investment funds, credit unions and microfinance institutions can all play a role in financing projects with a positive social and environmental impact. These institutions can offer loans, guarantees and equity investments to social enterprises and impact projects.
  3. Governments also have a key role to play in impact finance in Africa. Governments can provide tax and regulatory incentives to encourage investment in projects with positive social and environmental impact. They can play a role in providing grants and matching funding to help raise capital for impact projects.
  4. Civil society organisations, such as NGOs and local associations, can also play an important role in promoting and implementing projects with a positive social and environmental impact. These organizations can help identify local needs and innovative solutions, work in partnership with investors and businesses to design and implement impact projects, and ensure the active participation of local communities throughout the process.
  5. Social enterprises and entrepreneurs are key players in impact finance in Africa. These companies aim to create a positive social and environmental impact while being financially viable. They can provide services such as renewable energy, sustainable agriculture, health and education, while creating jobs and stimulating local economic development.
  6. Local communities are also important actors in impact finance in Africa. Projects with a positive social and environmental impact should be designed in collaboration with local communities, taking into account their needs and priorities. Local communities must be informed and consulted throughout the project design and implementation process, to ensure their active participation and support. We must also not forget the importance of the participation of civil society and local communities in the design and implementation of impact projects, to ensure that they truly meet the needs and priorities of African people.

Ultimately, impact finance in Africa involves a variety of actors working together to create social impact.

Feedback Finance in Common

The "Joining forces" conference on 18 October highlighted the importance of collaboration between the different actors involved in financing for sustainable development, including governments, international financial institutions, private investors and civil society. The panel on "Mobilising capital to remove barriers to SME financing and foster inclusive growth" reports €4.5 million of capital available for impact finance in Africa.

The importance of impact finance to help meet sustainable development financing needs in Africa, by investing in projects that have a positive social and environmental impact is clear. During this panel; Participants discussed several key themes, such as promoting financial inclusion, investing in sustainable infrastructure, adapting to climate change and mobilizing domestic resources. The conference also highlighted the importance of developing an enabling ecosystem for impact finance in Africa, including enabling regulations, reliable impact measurement systems, and effective public-private partnerships. 

Impact is achieved when finance is accessible to as many people as possible, with infrastructures facilitating the work of small and medium-sized enterprises (SMEs) that finance and build social inclusion, unlocking access to finance (such as microfinance and energy access structures). The example of the DER, a delegation dedicated to youth entrepreneurship in Senegal, works to build a bridge between organizations on the ground and the State was presented by Mame Aby Seya , the general delegate and panelist. In fact, a strong and sustainable public-private link is essential to achieve financial inclusion through access to finance for SMEs. Governments have a large share of responsibility for including these SMEs in the construction and development of large state projects, where only large groups (often international of origin) remain the only reliable actors who win tenders. The solution proposed by one of the panels would be technical support, in addition to the financial support that DFIs can provide in the private sector of fragile countries. SMEs certainly represent a greater risk, to mitigate it, it is necessary to base ourselves on long-term opportunities and think of other investment vehicles such as equity investments in addition to debt.