How Can Impact Investing Support Essential Local Not-For-Profit Institutions?
Impact investing, by its very nature, is designed to channel catalytic capital into investments that solve some of the world’s most pressing issues. Right now, this is more important than ever.
Through Wellers Impact’s experiences working in East Africa, this blog series is exploring the new challenges that East Africa and local institutions are facing as a result of the global COVID-19 pandemic. The previous two blogs explored these challenges and suggested that impact investing can be part of the recovery process as well as ensuring that East African communities, businesses and countries are more resilient into the future.
This blog continues this discussion by looking at the crucial role that local not-for-profits play in daily life and in the development of East Africa, and why their long-term financial independence and self-sustainability is crucial to the continued social and economic development of East Africa.
As previously discussed, in times of crisis, less developed regions often suffer most, and the not-for-profits (“NFPs”) that operate in these areas can struggle to deliver essential services to the community. Impact investing offers a solution to NFPs in this position, enabling them to continue their crucial work even when critical events cause disruption.
NFPs continue to play a vital role in East African communities. Their task is to provide important services to meet the basic needs of the vulnerable and to create opportunities for personal development within the community.
For instance, CMS-Africa, one of our ethical partners, facilitates women’s training programmes that stimulate empowerment and equip vulnerable women. The work that these NFPs do, like many, is widespread and transformative.
With East African governments currently failing to prioritise social care or endorse social enterprises, the support and sustainability of these kinds of organisations is even more crucial. For more information on the work of our ethical partners, visit Our Current Projects.
As is common around the world, East African NFPs rely primarily upon donor funding. Donor funding is often unreliable and insufficient to fulfil the NFPs’ targets, which limits their autonomy and constrains the reach of their work for the community in the long-term.
During a crisis, such as the Covid-19 pandemic and resulting recession, donor funding to the not-for-profit sector is expected to significantly decrease. As a result, vulnerable populations served by these organisations may not receive the necessary care and support in the future.
But, for many, there is a solution! Numerous NFP organisations in East Africa have great potential locked away in their prime real estate assets but lack the capital to release it. The land sits under-utilised, unable to generate a consistent, stable income for its owner.
This prime land has significantly increased in value in recent years. As a result, NFPs are approached by exploitative property developers who give them poor value offers to develop their land.
Wellers Impact, as an FCA authorised impact investment manager, helps to prevent this exploitation and unlock the potential of this land. Through our team’s long engagement in the region and trusted relationships, we develop the land to create transformative impact through increased autonomy and financial sustainability of the NFP.
The possession of a significant equity share in the building means that the partner organisation will have a sustainable, long-term income, ending their reliance upon donors and diversifying their sources of funding.
This sustainable income provides NFPs with resilience during times of crisis. Gaining independence and diverse sources of income can protect NFPs against unforeseen events.
Predictable and greater income allows for forward planning and saving in order to guard themselves against uncertainty. The equity stake in the building gives the NFP greater stability because real estate tends to retain its long-term value even during market fluctuations. In these ways, the NFP can continue to serve the community when it is most in need.
Wellers Impact’s experience working in East Africa has revealed that building strong relationships with the NFPs is central to this process. We take a unique approach that seeks to benefit these not-for-profit organisations as well as the investors.
Wellers Impact’s investment strategy involves giving NFPs a ‘fair deal’, ensuring that they are not exploited and that they benefit from the deal. The NFP partner contributes their land for the period of the development project and upon completion, the organisation will receive a legal equity share in the development in return, whilst maintaining ownership of their land.
Wellers Impact’s Fair Deal Philosophy means that the NFP will also be given a fair share of any profits earned in excess of the forecasted rate that would otherwise have been received by Wellers Impact in a traditional investment model.
The work that these NFP organisations do is invaluable and has an impact on the most vulnerable members of the community. These NFPs are indispensable and need as much support as possible. Through partnering with the NFPs in this region, entire communities can reap the benefits.
Wellers Impact is a UK-based, FCA-Regulated Impact Investment Manager who works to unlock community-focused impact through SDG-focused impact investing. Through innovative investment models that utilise fair economics, Wellers Impact originates investment opportunities across three core business activities; real estate developments in partnership with local land-owning not-for-profits in East Africa, financial support for agriculture firms and supply chains globally through sustainable development finance and direct investment into private water, sanitation and plastics recycling firms globally.