Social Impact Investing

Impact Investments:
An emerging asset class
Global Research
29 November 2010
Putting the size in context: Potential market is almost 5x the current market
The current invested capital (total assets minus total deposits) in the microfinance
market is about $37bn 95 . This means that our estimate will allow for the market to
grow by just over five times in the next 10 years. We recognize that some of this
capital may come from increased deposits rather than impact investment as MFIs
encourage their customers to save as well as borrow with them. Our analysis does not
take this potential increase in deposits into account. While there has been significant
growth already, and growth rates are slowing down from 34% in 2008 to 25% in
2009, our analysis reveals that there remains room for impact investment capital in
this market.
Segments we haven’t measured
As stated earlier the above framework has been applied only to some sub-segments
of the impact investment market and leaves significant scope for further research and
refinement. We expect a full and complete sizing effort would produce invested
capital and profit numbers many multiples of those we’ve presented above. In
addition to the fact that we only tackled sub-segments of the five sectors we
analyzed, the following significant segments of the market were left out due to
limitation in data availability, methodological challenges, and/or simply to keep
manageable the scope of analytical work for this particular report.
Agriculture
Impact investments in agriculture can span businesses providing food to BoP
customers, BoP suppliers of food or other agricultural inputs, businesses providing
logistical support such as storage and distribution, and businesses that organize or
aggregate smallholder farmers’ products to capture higher value in domestic or
export markets. Due to the challenges in finding a representative case study, we
leave an analysis of this sector for future research.
Energy
We did not attempt to size the market for clean energy products, given the wide array
of product and business types, and often the significant regulatory hurdles for
scalable business solutions. Clean energy services and products include solar home
systems, solar lanterns, energy efficient cook stoves, and hydro- or waste-biomass
generated electricity. The potential for clean energy solutions for the BoP market is
huge – a recent study 96 conducted by IFMR Research-Centre for Development
Finance and the World Resource Institute estimated that the consumer market in
India alone is $2.1bn per year.
Small and Medium Enterprise (“SME”) finance
We have not attempted to separately size the SME finance market due to both the
significant overlap between the SME market and the various sectors (education,
housing, etc.) that we have measured, where many impact investments would be
defined as SME, and the difficulty in determining what subset of the SME market
serving or employing the BoP+ populations can be considered to represent an impact
investment (i.e. operating with social intent).
95 About $30bn is measured by taking the total assets minus total deposits across the MIX data
set. We then scale by the 80% representative factor to arrive at $37bn.
96 Power to the People: Investing in Clean Energy for the Base of the Pyramid in India, IFMR
Research-Centre for Development Finance and the World Resource Institute, October 2010
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