OXFAM is launching an innovative small company investment fund which it hopes will demonstrate that investing in developing countries can deliver both social and financial returns.
Launched in Edinburgh, the fund is among the UK's first to be badged as "impact investing", a sector growing rapidly in the US. Such funding overtly seeks positive social impacts alongside investor profits.
The Small Enterprise Impact Investment Fund (SEIIF) will invest in small and medium-sized enterprises in developing countries and aims to create 100,000 "good quality jobs" within five years. It is a joint initiative with Symbiotics, a Geneva-based asset management group specialising in microfinance, in which Oxfam will act as "impact adviser" working with the fund's investment committee. While recognising it would attract interest from Oxfam supporters, the charity said the fund would be aimed at investing institutions.
Gavin Stewart, former chief executive of the Resolution/Ignis fund management business in Glasgow, is one of the professionals on the fund's investment committee. He said: "The long-term potential benefit from proving you can invest successfully in this area is massive and I look forward to helping this new fund be a success."
Stephen Acheson, a director at Standard Life Investments which hosted the launch, said: "One of the greatest obstacles facing entrepreneurs and small businesses anywhere in the world is access to funding. This problem is particularly acute in developing countries."
Annie Lewis, of Oxfam Scotland, said: "The private sector has a critical role to play in lifting people out of poverty and has the potential to drive huge SME growth in developing countries at a scale that is simply not possible for traditional development finance institutions to achieve on their own."
Oxfam says there are many small businesses in Africa and Asia which are stifled by underfunding and limited access to credit. The SEIIF will target this financing gap by investing in a range of local financial inter-mediaries which focus on small enterprise development, such as local banks.
Oxfam will offer independent intelligence on the impact of the investment. The primary focus will be activities which build women's empowerment, job creation and food security.
The three-year target for the fund is $100 million (£64m), and it will offer investors measurable social impacts and financial returns, alongside relatively low risk.
Gavin Francis, a director at Worthstone, a consultancy set up to promote impact investing in the UK, said: "This looks very promising to me – $100m will give huge credibility. Even at a quarter of that size it would be significant."