Impact Investors Are Changing: Analysis from the GIIN Surveys

By Waka Itagaki

This article is the second in a series from this author on the topic of impact investing. For Waka Itagaki’s earlier post on reducing transaction costs in development impact bonds, please click here.

 

Introduction and Background

The role that impact investors are playing in international development is increasingly growing. The amount of assets under management (AUM), the total market value of investments managed by financial institutions, in emerging countries was $36.4 billion in 2015. This is larger than the net Official Development Assistance (ODA) provided by the United States. International development actors should pay attention to this shift and become acquainted with the work of impact investors. One way to do this is through reading the annual impact investor surveys conducted by the Global Impact Investing Network (GIIN).

GIIN is a nonprofit organization that supports activities, education, and research that accelerate the development of a coherent impact investing industry. GIIN has conducted annual impact investor surveys since 2009 by leveraging its network of impact investors, and the surveys provide information on the current situation of impact investors. However, these surveys fail to acknowledge how impact investors are changing over time. Moreover, there is not much literature by other stakeholders that analyzes the data and discusses trends in impact investing in a consumable way. This article fills this gap by analyzing six GIIN surveys from 2009 to 2015 to illustrate how impact investors are changing.

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Reducing Transaction Costs in Development Impact Bonds

By Waka Itagaki

Development Impact Bonds (DIBs) are a results-based financing mechanism that leverages private capital for international development. Since the first DIBs were created in 2014, one of the mechanism’s key challenges has been high transaction costs: Each DIB project is unique, and this customization increases legal fees and requires financial intermediary and technical services. This article highlights two ways to reduce these costs: sharing data and knowledge about DIBs among stakeholders, and limiting the focus of DIBs. The reduction of transaction costs will promote greater use of DIBs for international development.

Introduction and Background

DIBs catalyze private investment that generates social impact as well as financial return, so called “impact investment,” by engaging private investors, service providers, host-country governments, donors, and intermediaries. Once all stakeholders agree on a common goal and an evaluation method, private investors provide upfront funding for a development project and work with service providers. If and only if the pre-agreed development outcomes are achieved, host-country governments or donors repay the investors. An intermediary organization coordinates among the stakeholders and contributes to the creation of a deal that meets all stakeholders’ interests.

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Reimagining Refugee Integration: Economic Burden or Boon?

By Ryan Lasnick

The changing dynamic of refugee situations across the globe necessitates new and creative solutions that reconcile the economic interests of host nations with the considerable needs of all refugees. Two-thirds of the world’s refugees have lived in exile for more than five years, often in overcrowded slums without freedom of movement and no possibility of work. These refugees are kept in a holding pattern, forced to wait for peace so that they can return to their homes. Refugees need financial stability to survive in their host countries, which only integration into the economy can provide.

One path toward integrating refugees as well as fostering economic growth within a country is the creation of special economic zones (SEZs). By understanding refugees not only as a humanitarian challenge but also a development opportunity, countries can create economic opportunities that are mutually beneficial. This post considers the case of the King Hussein Bin Talal Development Area (KHBTDA) in Jordan to analyze the potential impact of opening up labor markets for refugees.

While the creation of SEZs that are specifically open to refugees is a relatively new idea, SEZs in general are not. In fact, over the past decade Jordan has invested in the creation of several SEZs in order to attract foreign investment, increase employment, advance high-value economies, and facilitate the transfer of technology and skills. These zones are set up strategically throughout the country, but remain widely underutilized. The zones have the potential to be successful, already having robust physical infrastructure in place, but they lack the human and private capital needed to create sustainable economic opportunities for Jordan. In this case Jordan’s large educated working class hinders its economic development because most Jordanians are reluctant to take low-wage, labor-intensive manufacturing jobs that are common in SEZs.

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Energy Deficiency Restricts Development Progress in Africa

By William Kabagambe

In the twenty-first century, access to energy is vital to society’s basic needs. Modern energy sources are critical inputs to economic development, yet 1.2 billion people around the world live without access to electricity. In Africa alone, 600 million people do not have access to electricity, and even those with access use a fraction of the power that US citizens do.

Demand for energy in Sub-Saharan Africa (SSA) in particular is growing; the region is projected to consume close to 1,600 terawatt hours by 2040, four times the amount used in 2010. Despite the increasing demand, more than half of SSA’s nations are currently experiencing power shortages and rolling blackouts. Without reliable energy from the grid, most business and families must rely on generators. In SSA, generators can cost between three to six times more than they do in the rest of the world. Given the high costs of electricity generation, development objectives are increasingly difficult to attain, resulting in unemployment and economic stagnation. With growing populations and declining economic growth, the challenges to improved energy access are numerous.  SSA must create critical infrastructure, implement effective policy and promote new sources of investments if it is to unlock its development potential.

A woman uses fuel to cook in Burkina Faso. The WHO estimates that around 3 billion people globally still cook and heat their homes using solid fuels in open fires and leaky stoves. Image courtesy of Flickr user TREEAID under a Creative Commons Attribution 2.0 Generic License.

A woman uses fuel to cook in Burkina Faso. The WHO estimates that around 3 billion people globally still cook and heat their homes using solid fuels in open fires and leaky stoves. Image courtesy of Flickr user TREEAID under a Creative Commons Attribution 2.0 Generic License.

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An Invisible Population: The Changing Dynamic of a Growing Refugee Population

By Ryan Lasnick

The UN estimates that there are currently 59.5 million displaced people living in the world, the highest number in since World War II. While the common perception of refugees is an image of people living in rural tent cities set up by humanitarian organizations such as the UN, this is no longer the case. In fact, more than 55 percent of all refugees now live in urban areas, and this is consistently growing. The influx of refugees into urban environments poses vastly different problems than that of a traditional refugee camp and requires new and creative approaches.

Refugees in camps are afforded assistance and protection as part of the UN High Commission for Refugees (UNHCR) mandate and as an incentive for the host country to keep them in one area. In contrast, urban refugees receive little assistance and what they do receive is insufficient to meet basic needs. A recent study by the Refugee Studies Centre stated that 78 percent of urban refugee households in Uganda manage to survive despite receiving no support of any form from UNHCR or other refugee-supporting agencies.

Fawaz Rarhail Turkey, 59, from Homs, Syria, pictured with his family outside a derelict house in Al Mafraq, Jordan, which they moved into after leaving Syria. "The army forced entry into our homes and we became afraid for our children so we were forced to

Syrian refugee Fawaz Rarhail Turkey stands with his family outside his home in Al Mafraq Jordan. “After the army forced their way into our homes we were afraid for our children’s safety and decided to flee the country,” he said. Andrew McConnell/IRC/Panos Pictures for the European Commission via Flickr.

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