Impact investing lends a hand to struggling social entrepreneurs
11 August 2020 at 8:06 am
New analysis lays out the challenges social entrepreneurs face during coronavirus and how impact investors can help them
With the spread of COVID-19 bringing unprecedented challenges upon the social business community, new analysis is highlighting the major challenges social entrepreneurs face and how impact investing can help.
Published by the Global Impact Investing Network on Thursday, the report found that while the impact investing community had on the whole provided additional support for struggling investees amid coronavirus, more had to be done if businesses were to survive the pandemic.
The report is part of the network’s Response, Recovery, and Resilience Investment Coalition (3R Coalition), which brings together some of the world’s biggest players in impact investing to identify opportunities to invest in health interventions and access to capital, and will direct new capital to fill coronavirus financing gaps.
The issue brief includes data from 21 asset owners, asset managers, and service providers, as well as input from members of the R3 Coalition.
The report said that entrepreneurs’ short, medium and long-term challenges lay in needing to address solvency constraints, adjusting business to make sure impact and finance obligations were met, and reimagining business models and processes with the future in mind.
To tackle the immediate challenges, impact investors had provided liquidity or liquidity management support, adjusted repayment schedules, and coordinated among investors and other partners to align adjustments and expectations.
The report pointed to a number of investors that had launched emergency funds to help support entrepreneurs during COVID, including Big Society Capital’s £100 million (A$182 million) Resilience and Recovery Loan Fund and The International Islamic Trade Finance Corporation’s US$330 million (A$459 million) commitment to immediate COVID-19 response needs.
For the longer-term challenges, strategies among impact investors included extending time horizon expectations, expanding the use of project finance, offering human resource guidance, offering support to implement new business lines, strengthening focus on addressing inequalities, reducing the administrative burden, and revising financial management systems.
Positively, the report said that with investor support, many entrepreneurs were able to pivot their business models and launch new products to deal with the effects of coronavirus, and help underserved markets.
The report said that while investors will likely continue on with their current strategies to assist struggling entrepreneurs, they were aware of the need for strategies that directly addressed social equity and justice in a bid to build back a post-pandemic world that was more resilient, sustainable and inclusive.
The final report in the series will be released in September.