The Case for Impact Investment in Africa in 2015
Africa’s economy is expected to expand by 50 percent over the next five years, according to a new analysis from Deloitte. This explosive growth is driven, in part, by Africa’s emerging middle class. Yet despite this progress, many Africans still lack access to essential services like schools, banks and hospitals.
While governments and philanthropic groups worldwide operate with limited budgets, private industry in 2015 has a significant role to play in helping those left behind by the continent’s rapid economic expansion. In Africa, impact investing – targeted capital into businesses working to expand accessibility to essential products and services to those who most need them – is critical to the continent’s continued economic growth.
Impact investing isn’t philanthropy; it aims to turn a profit. But unlike conventional investing, impact investing is designed to serve a larger social purpose: providing underserved populations with the resources they need to improve their lives. By delivering the products and services that empower the poor to lift themselves out of poverty, impact investing can scale solutions quicker than traditional philanthropy.
Consider the revolution wrought by microfinance. Local entrepreneurs receive small loans to start and grow businesses. For many of the 160 million people who’ve received such assistance, microfinance has enabled them to build a livelihood and better address the needs of their families.
But the individual dollar amounts involved in microfinance are, more or less by definition, very small. And the needs in Africa are very big.
Take health care. There are only nine hospital beds for every 10,000 people in Africa. That’s two-thirds below the global average.
There are similar problems in education. Most African students are stuck in overcrowded classrooms with insufficiently trained teachers. In Chad, the average classroom size is 67 students – more than double what one would find in rich countries.