PE Hub – Supporting emerging markets with innovative fund structures

Posted on August 8, 2016 by Unitus Impact

Private equity is a critical tool for addressing some of the biggest challenges of the developing world, from poverty to food insecurity to high unemployment and overall lack of opportunity. Supporting emerging market private equity funds is one of the ways the Overseas Private Investment Corporation (OPIC) has catalyzed capital to address these major world challenges.

The funds we’ve supported have invested in a range of businesses, from small farms in Sub-Saharan Africa that have been able to increase yields, to a school in Egypt that was able to expand and host more Syrian refugees, to a lending institution in Mexico that provided loans to thousands of low-income individuals.

In recent years we also started noticing a pattern. When we issued calls for proposals, some of the applying funds that showed strong promise for having a positive social impact in developing countries had some unconventional features that we could not consider in our formal calls process.

Some of these applications were for funds that were quite small, or had nontraditional features, or unique business models, but which still offered compelling investment propositions to reach populations that were not easy to reach in other ways.

Last year, for example, we committed financing to Unitus’ Livelihood Impact Fund, a prospective fund that supports a range of small businesses from agriculture producers in India to shopkeepers in Vietnam. Because of this fund’s small size, it was not a natural candidate for OPIC Investment Funds financing. But since it is investing in scalable, early-stage businesses that will help create jobs and increase the incomes of the working poor, it is very much aligned with OPIC’s mission.

First-time funds often struggle to raise sufficient LP backing and these less conventional funds often do not have a lot of doors to knock on. While their focus in hard-to-reach areas of the developing world can help OPIC advance its mission, OPIC is able to help them increase visibility and target other institutional players. OPIC’s experience and embassy presence around the world can bring a measure of additional confidence to investors in frontier markets.

 

Read the full article at PE Hub here.

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