Impact Linked Financing for high-impact organisations suf-fering from the COVID-19 crisis
The Impact-Linked Finance Fund (ILFF) addresses major challenges, which private-sector organisations creating strong positive impact for vulnerable communities are facing due to COVID-19. These high-impact organisations (HIOs) will benefit greatly from an innovative financing approach that rewards them directly for verified outcomes. The project will focus on HIOs in Eastern and Southern Africa suffering from the COVID-19 crisis and providing important sustainable services at affordable prices to the poor.
Southern and Eastern Africa
Employment & economic development
- Foreign private sector North
COVID 19 is a health and economic disaster. It affects one important multiplier for poverty reduction and inclusion economically: So-called High Impact Organisations (HIOs) (private sector organisations creating strong positive impact for vulnerable communities) have the mission to provide sustainable services and products at affordable price to low-income, excluded households. Many SDC Eastern and Southern Africa Division (OSA) programs work via these organisations as multipliers to have significant outreach to hundreds of thousands of beneficiaries in rural areas. Crisis has hurt these organisations quicker and harder than others and in turn is pushing their direct beneficiaries at risk of losing jobs and livelihoods.
Many HIOs are in dire need of support to save the total impact they generate as a recent internal analysis of SDC partner impact organisations in the region showed.
The newly founded ILFF is addressing this problem by providing financial solutions to market-based organisations that directly link financial rewards to the achievement of positive social outcomes. It empowers these HIOs with an innovative financing approach called Impact-Linked Finance (ILF) and includes conditional private sector matching funds. These organisation will not only be enabled to cope with the crisis, but also to create even more impact and benefits for their clients at the bottom of the pyramid.
The Eastern and Southern Africa Division foresees this programme as a single phase in order to respond quickly to COVID-19 affected enterprises. This support will contribute to greater awareness of SDC in supporting ILF and will path the way for additional ILF funding in the region.
|Objectives||The aim of this project is to maintain and safeguard High Impact Organisations (HIOs), especially in the on-going and post COVID-19 environment, and to ensure that the Impact-Linked Finance Fund will enable them to create additional income, employment and improved livelihoods for low income and disadvantaged households - in particular female headed households - in the OSA region.|
Direct beneficiaries: High Impact Organisations namely private sector organisations that create strong positive impact for vulnerable communities, in particular existing portfolio companies of SDC/Medicor & impact investors partnering with the Fund.
End beneficiaries: Hundreds of thousands of low-income clients, patients and suppliers in the OSA region.
The three main outcomes of ILFF under this funding window are:
1. Per $1M invested up to 4 HIOs provide essential products and services to additional 4’000 disadvantaged and low-income households - in particular female headed households - especially in an on-going and post-COVID-19 environment.
2. $1M ILF funds invested leverages at least $1M private sector investment.
3. The ILF model proves attractive to impact investors with increased ILF-based deal flows (target $ 20M in 4-5 years).
1. At least 8 HIOs receive appropriate support and investment;
2. ILF-based transactions ensure financial viability in the short term and/or recovery in an on-going and post COVID-19 environment;
3. Clearly defined exit strategy for continued operations after ILF intervention;
4. Robust and convincing social impact data made available (incl. gender disaggregation);
5. Impact-first investors begin to view ILF as an attractive means to engage in cooperation with philanthropic bodies and other donors.
Results from previous phases:
Roots of Impact and SDC co-developed the Social Impact Incentives (SIINC) and enlarged this to the Impact-Linked Finance (ILF) concept. They have been pioneering SIINC since 2016, first in Latin America. The ILFF builds on these experiences.
SIINC leverages private investment at 1-5 times the SIINC amount, depending on sector/business.
Outreach is variable, with good SIINC examples reaching 10’000 additional patients (improving their livelihood), and smaller ones only several hundreds, but with higher depth of impact. Cost Benefit Relations are in all single deals respected during preparation, results are good to excellent.
A lot of innovation potential for the blended finance industry has already been achieved.
|Directorate/federal office responsible||
Impact Linked Finance Fund (Dutch foundation co-created by Roots of Impact (ROI) and iGravity)
|Coordination with other projects and actors||
Synergies with SDC Eastern and Southern Africa Division country programs working with HIOs and focusing on e+i, agriculture & food security, health/nutrition in rural areas and the regional social enterprise program .
Coordination with SDC ILF initiatives and on-going SIINC programs such as the EnDev – Off-Grid Energy or the newly started Aceli of the GPFS in SSA as well as others.
|Budget||Current phase Swiss budget CHF 2’220’000 Swiss disbursement to date CHF 900’000|