Top 10 Finance & Investment project insights from 2021

Despite mostly working from home, 2021 was an incredibly busy year. I am grateful to have had the opportunity to lead and/or advise on 24 consulting projects across a wide range of client types and topics. The year was filled with a dizzying array of webinars and Teams and Zoom videoconference calls filled with numerous insights and learnings. Thus, as many people often wonder what I do for work, I thought a fun way to close this strange and virtual year would be to share ten insights[1] that capture some of the key learnings in the Finance & Investment practice from my vantage point:

#10: Innovative results-based financing approaches can be designed successfully in new areas such as road safety infrastructure projects.?The announcement of two road safety sustainable development bond projects announced recently was the result of several months of research, design and road-show support we provided IFC.?

#9: Investing in MSMEs contributes to their business growth, which in turn positively impacts sustainable livelihoods. ?This was a key learning from a literature review conducted for FMO and webinar we supported with CGAP.

#8: Done right, blended finance can mobilize private capital by creating financial structures that allow impact-oriented donors and commercial capital providers to deploy capital alongside each other and achieve goals that would not have been possible otherwise. This was a learning from a guidance note and associated case studies we developed for USAID INVEST program. As a case in point, with our support USAID provided catalytic capital and technical assistance to portfolio companies on ESG and impact management practices that enabled Pomona Impact to invest in job-creating agriculture and manufacturing businesses in Central America.

#7: Nevertheless, even when impact investors use patient capital, only a handful (roughly 11 percent) of organizations that receive investment achieve sustainability and scale of impact in practice. This was a key learning from a forthcoming 20-year review of patient capital we worked on with the Acumen Fund.

#6: Responsible exits in impact investing are just as much about responsible entry, as levers to ensure impact at exit stage are far fewer than before and during investment. The most important levers include ensuring to align investor and investee impact vision before investment and supporting the investee to incorporate impact strategies while invested.?This was key learning from work we conducted with Omidyar Network in India.??

#5: While often undervalued, technical assistance and specifically enterprise support services which leverage five fundamental considerations, acronymized as SCALE, have been proven to increase effectiveness and, as a result, boost small and growing businesses performance, revenues, and job creation. This was the key takeaway from a report and toolkit we developed for Argidius Foundation which synthesized eight years of enterprises support learnings and evidence on what actually works in supporting small business growth and job creation.

#4: A mix of demographic, business, and behavioral variables – notably financial literacy, income growth and leadership experience - are most useful in identifying high potential female small business entrepreneurs and tailoring financial and non-financial services to their needs. This was a key learning from the design of a new program called ‘Bridge to Success’ for Friendship Bridge we supported with funding from Target Foundation.???

#3: Historically, BIPOC and women-led small businesses have less access to equity or debt finance in the United States. Specifically, BIPOC-led small businesses have lower loan approval rates and smaller loan sizes than non-minority business owners and both women and BIPOC-led small businesses are less likely to receive VC funding.?This was the conclusion presented at the Entrepreneurship Funders Network (EFN) conference in July from work we conducted for the Lemelson Foundation.?

#2: Only five percent of climate finance commitments are allocated toward adaptation and resilience activities, suggesting there is a growing need for donors and financers to strike a better balance between mitigation and adaptation and resilience financing.?This is especially true as most of the burden for adaptation will fall on countries least able to pay and least responsible for rising temperatures. ?This was a key finding of COP26 and the new USAID climate strategy as well as of our learning brief on blended finance for climate action.?

#1: Inclusive healthcare investing in emerging market is on the rise. Specifically, investors focusing on biotech, private clinics and hospitals, diagnostics and pharmacies filling service access and quality gaps for consumers earning between $5-30 a day are increasingly successful. This was one of the findings from a market landscape report we conducted for a member of the Investors for Health community.

Kusi Hornberger is a Partner and co-lead of Dalberg’s Finance & Investment practice. The views and synthesis of insights in this article are his own.?

[1] The insights are not in rank order but rather organized thematically. All of the work was equally interesting. ?