The recently released Monitor Deloitte report Beyond the Pioneer examines why so few market-based solutions to poverty are getting to scale and what can be done so that they can deliver meaningful benefits to the poor. Based on research spanning Asia and Africa, the report’s main finding is that many of the barriers to scale cannot or will not be addressed effectively by any individual firm. What is needed is external support in the form of market facilitators that can remove these barriers at an ecosystem level.
Our own experience at Artha Networks Inc (ANI) over the last ten years, helping to build ecosystems friendly to investors and SMEs in India, Africa and Latin America, bears out the report’s main findings.
Impact investors as market facilitators
In our view, impact investors are uniquely well placed to play the role of facilitator. Impact investing is still evolving and impact investors are therefore more open to new ways of working with firms and with one another. To use the language of Beyond the Pioneer, impact investors frequently have a ‘wider lens’ than other actors in the development space. In addition, their willingness to commit their own funds for periods of five to ten years gives them the heightened credibility that comes from having real skin in the game.
Unfortunately, much of this potential remains unrealized. Based on our experience, impact investors can be effective market facilitators when they do three things:
1 Look beyond the transaction to identify the kind of systemic change their activities (eg due diligence) can spark.
2 Leverage local knowledge and resources.
3 Recognize that scaling market-based solutions to poverty is a messy process.
Shareholder reports tend to highlight elegant models that yield clear and favourable outcomes, but the reality is that overcoming poverty-related challenges is incredibly complex and fraught with information gaps and feedback lags. This complexity is usually too much for any one impact investor to fully comprehend, let alone overcome, so we believe a network approach will work best.