Impact-Linked Finance Fund Eastern and Southern Africa Funding WindowProviding better terms for better impact
Impact-Linked Finance Fund Eastern and Southern Africa (ILFF ESA)
Roots of Impact and its partner iGravity are looking for high impact organizations in Eastern and Southern Africa that are preparing to raise investment to support them with two different impact-linked funding mechanisms: Social Impact Incentives – SIINC (time-limited financial rewards for achieving positive social outcomes), and Impact-Linked Loans (repayable loans whose financial cost is lowered by achieving pre-determined positive social outcomes).
The overall objective of the ILFF Eastern and Southern Africa (ILFF ESA) Funding Window is to provide impact-linked funding to impact enterprises, thus enabling them to scale in both economic and impact terms. From an impact perspective, the aim is to help enterprises and local populations battle through the Covid-19 crisis, and strengthen the enterprises’ focus on impact, particularly in terms of serving vulnerable, low-income populations.
The Funding Window is open for enterprises operating in Eastern and Southern Africa, with a preference for one or more of the following: Tanzania, Mozambique, Uganda, and the Democratic Republic of Congo. The target sectors are Health (including nutrition and basic services), WASH (Water, Sanitation and Hygiene), sustainable agriculture and food security, and income and employment. From a business management perspective, the Impact-Linked Finance mechanisms provided through the funding window will allow enterprises to strengthen and scale their business models and ensure they continue to be or become economically viable and profitable over time.
iGravity and Roots of Impact are the Facility Managers of this investment window, responsible for pre-selecting enterprises and structuring terms. This initiative is sponsored by the Swiss Agency for Development and Cooperation (SDC) and the Medicor Foundation.
The enterprises must be operational for at least three years in Eastern and Southern Africa, with a preference for one or more of the following: Tanzania, Mozambique, Uganda, and the Democratic Republic of Congo. The target sectors are Health (including nutrition and basic services), WASH (Water, Sanitation and Hygiene), sustainable agriculture and food security, and income and employment. In order to be eligible for SIINC, enterprises must be seeking a repayable investment (debt, equity, etc.) that is at minimum double of the SIINC amount (2:1 financial leverage). There are no leverage requirements for the Impact-Linked Loans.
Although there are no specific constraints regarding the legal form, the enterprises need to have a business model and generate revenues out of their activities.
The objective of the ILFF ESA program is to support enterprises which will continue to generate positive impact long after the SIINC payments or the Impact-Linked Loan have ended. Thus, the enterprises must have either already achieved financial sustainability, or must have a clear plan for achieving breakeven in the short to medium term.
The support provided to the enterprises in this program takes the form of time-bound outcomes-based payments, granted to incentivize positive social impact. In order to design a realistic payment schedule, it is necessary to have baseline data related to the impact generated by the enterprise. There should be a track record of systematically tracked and reported indicators which can act as a basis for structuring the SIINC payments or the Impact-Linked Loan.
Enterprises that target vulnerable populations will be of particular interest. Enterprises that do not have a specific impact focus are also eligible if they prove to be willing and able to deliver positive social outcomes.
Overall, the parameters of the Funding Window are:
- Overall objectives:Reward enterprises for the additional positive impact they create, with a particular focus on vulnerable, low-income populations
- Target investees:
- Impact enterprises
- Impact-driven SMEs and
- local start-ups NGOs with market-based/entrepreneurial approaches
- Covid-19: Enterprises that have been strongly negatively impacted by Covid-19, or that propose solutions that can help tackle the crisis
- Geography: Operations in Eastern and Southern Africa, with a preference for one or more of the following: Tanzania, Mozambique, Uganda, and the Democratic Republic of Congo
- Target sectors: Health (including nutrition and basic services), WASH (Water, Sanitation and Hygiene), sustainable agriculture and food security, and income and employment
- Instruments Social Impact Incentives (SIINC) and Impact-Linked Loans
- Ticket sizes:
- SIINC: USD or local currency equivalent of approximately USD 150-350K
- ILL: USD or local currency equivalent of approximately USD 100-200K Terms Will be defined on a case-by-case basis
- Time frame: The selection process will be finalized by August 2021. It will be followed by the structuring phase, which will terminate in October. Final closing and signing of the documentation are estimated to finish prior to year-end 2021.
Social Impact Incentives (SIINC) is a funding instrument that rewards impact enterprises with time-limited payments for achieving pre-defined and independently verified social outcomes. Enterprises can earn additional revenue and improve their profitability, which in turn helps them to attract additional investment to scale. To be eligible for receiving SIINC, impact enterprises need to raise repayable investment in parallel. The nature of the investment round can vary (e.g. equity, debt, mezzanine, etc.) but the size must be at minimum double of the SIINC amount.
*Impact-Linked Loans (ILL)
An Impact-Linked Loan is similar to a traditional loan, with the main exception that the interest rates are tied to the borrowers’ achievement of pre-defined and independently verified social outcomes. The enterprise receives “better terms for better impact”. Enterprises of all stages are welcome to apply for the Impact-Linked Loan track, particularly those at a growth stage. As opposed to SIINC, there are no leverage requirements for the Impact-Linked Loans.