Supply- Demand of Capital in SE- East Africa (sanitaized)

Faheem Noor Ali
Consultant, Development Marketplace
World Bank Institute
Fnoorali@worldbank.org
Supply and Demand of Capital in Social Enterprise (SE) in the East Africa

Purpose: Understand the finance gap between investors and entrepreneurs
-14 investing organizations (foundations, banks, equity investors, TA providers) with activities in East Africa were interviewed
-Interviews based on 49 question survey conducted by study lead
-16 social entrepreneurs from a cross section of sectors active in East Africa were interviewed
-Interviews based on 40 question survey conducted by study lead
Results are based on the best available evidence from interview subjects and other stakeholders active in East Africa social enterprise.
All interviews conducted in Nairobi, Kenya between February and April 2012

0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
TA
Grants
Zero interest loans
(including payment
for TA and other
services)
Debt (including loans
for TA and other
services)
Quaisi equity
Equity
Other
March-2011
4
Limited funding is available at the early stage…
Seed
Early Stage
Sustain and early growth stage
Scale

… resulting in a limited amount of deals clearing the pipeline
Deal
Deal
Deal
Deal
70% - 90% are too early stage
10% to 20% don’t have good mgmt or model
5% to 10% don’t reach deal with entrepreneur
1% to 5% are invested
Investment Pipeline
Investors are exposed to hundreds of deals a year

Social impact is secondary to financial performance
•There is no clear definition of social enterprise
–Impact-first and social-first investors investments have differing priorities
–Many entrepreneurs have difficulty maximizing impact AND profits
•Measuring impact is secondary to finance
–While impact standards exist, they are not widely used
–Investment funders look at financial performance first

Entrepreneurs crave financial access
Access to Finance
Human Capital
Regulations
Entrepreneurs need early stage financing to scale. Even when an investor is on board, getting timely funding is an issue
Grant capital and non-profits are taxed in Kenya, squeezing enterprise margins
Finding leaders that appeal to investors and staff with appropriate technical knowledge is a challenge

Investors must overcome risk
Systematic Risk
Transaction Costs
Lack of Mature Investments
Upcoming elections have investors weary while unpredictable weather patterns have investors question profitability
Lack of social entrepreneur technical skills and illiquidity of investment are top investment risks
The cost of due diligence can cost 20% of a given deal and management fees are minimal over a long period of time

Investors provide capital with return requirements comparable to the US
Investors
Entrepreneurs
Capital provided in forms of grants, debt (11% to 15% rate), quasi-equity and equity (IRR ranging 15% to 45%)
Investors receive board seats, non-dilution clauses, approval on major expenses for equity, debt with equity on upside
Governments
Donors/ NGOs
High Net Worth Individuals
Revenues
Savings
Friends and Family

Perceptions of investment risk is the core of the financing gap
•Investors and Entrepreneurs agree that revenue and cash flow are good financial metrics
•However there is disagreement…..
–Entrepreneurs complain that investors don’t understand time sensitivity of cash flow
–Investors don’t agree that social enterprises are less risky than similar commercial investments

Interventions may help increase deal flow
Strengthen Entrepreneurs
Technical Assistance
Capital Guarantees
Capital Coordination
Investors: 75% of their portfolio would be more profitable with technical assistance
Action
Instrument
Mitigate Investor Risk
DFIs and Banks can provide guarantees so that investors share risk
Different investors deploy capital at different times, but share diligence costs

Encouraging developments may help
social enterprise
Crowdfunding grants and
debt has developed already
and new US legislation will
allow for equity crowdfunding
Kenya’s Vision 2030 looks for
economic growth starting
with the BoP while faith
groups are effective in
deploying good and services
to Kenya’s poor

Kenya is growing…
World Bank: Kenya could attain middle income status by 2019 if it maintains average GDP growth of 6% per year

…. but traditional sources of financing are costly
Lending rates were at 26% in March 2012

East Africa Social Enterprise was borne out of microfinance
Social enterprise is an evolution of micro-finance in East Africa, where it was a hotbed of activity for several years, largely supported by non- government organizations (NGOs) and development finance institutions (DFIs).
When donor funding for micro-finance started to dwindle in the late 90s, “these organizations came under pressure to find creative ways of sustaining themselves by finding alternative sources of funding”. (Allavida)
Responding to a need to be financially sustainable yet stay on mission, these organizations started to search for new sources of capital.
1980s to late 1990s
Early 2000s
Late 1990s

Missing Middle
•The missing middle refers to those enterprises that seek capital between $25,000 and $2M in order to achieve growth, but cannot find investors. These companies include small and medium enterprises (SMEs)
•In high-income countries, SMEs are responsible for over 50% of GDP and over 60% of employment, but in low-income countries they are less than half of that: 30% of employment and 17% of GDP .
“Too large to access microcredit and too small and risky for traditional bank loans…. These entrepreneurs are caught in the “missing middle,” often sinking all of their assets into business ventures, only to find their contributions unmatched and their potential unmet”
- Rockefeller Foundation Annual Report, 2009

There is no clear definition of Social Enterprise
A Social Enterprise must have impact over 1000 people by direct income or cost saving and the business that provide econ activity through earned income or cost savings
-Investor
Companies with the right product and right attitude will have an impact
- Investor
One that creates jobs and enables people to feed their families
- Entrepreneur
Building a market based approach, but driven by a social impact
- Entrepreneur
“How do you define Social Enterprise?”

Social Enterprise are active in BoP sectors
Many agriculture and health enterprises are considered social enterprises by virtue of working in rural areas, where the majority of people are poor
Where Investors are active
Where Entrepreneurs focus
Farming and Agriculture
11
4
Access to financial services
7
Energy solutions to the poor
7
1
Health solutions to the poor
5
6
Jobs and Employment
5
1
Housing
4
Tourism
4
Education
3
1
Technology
3
Other
3
Transportation
1
1

Majority of Kenya’s poor live in Rural Areas
40.5 M
•Population of Kenya
31.5 M
•Rural Population of Kenya
15.5 M
•Number of Rural Poor in Kenya
45.9% of Kenyans live below the national poverty line and the
lowest 20% of Kenyans share 4.8% of the national income

Social Enterprise plays a role in the Kenyan Economy
By combining the business-like ideals and approaches with their relentless quest to radically improve the livelihoods of their people in a sustainable manner, social entrepreneurs have become a force to reckon with and have truly claimed their rightful nice in the development arena. They have become the so called “Third Pillar” in the development discourse and practice, and I would like to take this opportunity to recognize and underscore their critical role in solving the social and economic problems we face in our countries today - Finance Minister Kenyatta 2009

Grants and Debt have clean exits…
Capital Type
Perspective
Advantage
Disadvantage
Grants
Entrepreneur
"Free money” not requiring financial return
Application process is cumbersome
Can be used to build capacity
Grants can be restrictive
Non-renewable
Investor
Least amount of financial risk
Lack of financial accountability
No budget to verify results
Debt
Entrepreneur
Can apply to working capital
Rates can be high
Does not result in loss of company control
Some require collateral
Investor
Increases accountability
Can not influence business
Structured exit
Sometimes no collateral

… while quasi-equity and equity reflect partnership
Capital Type
Perspective
Advantage
Disadvantage
Quasi Equity
Entrepreneur
Can apply to working capital
Lose control if do well
Lower rate than traditional debt
Delay due to some due dilliegence
Investor
Limit risk while still getting upside
Lower interest rate
Equity
Entrepreneur
Engaged partner in the business
Negotiating valuation
Can use for working capital and scale
Have to give up control of the company
Equity attracts more equity
Takes a long time to get equity investment
Requires audited financials
Investor
Can control company
Very high risk
Higher return if done well
Investment Committee is often not in country and they are tough to convince

There is no capital structure standard
•The supply and demand for different types of capital vary
–Industry: Tech companies, for example, do not have collateral and do not appeal to debt investors
–Mission: Some organizations can only be sustained through grant capital throughout their life cycle

Attitudes toward equity differ among entrepreneurs and investors….
Investors see equity investments as “growing the pie”…..
… while some entrepreneurs see equity “as eating at their pie”
Investors give equity to let the company grow…..
…but entrepreneurs can’t wait for the standard 6-9 months to get it
VS
VS

...yet there is no clear consensus on the role of debt
•Some social entrepreneurs feel that debt and quasi- equity investments do not reflect commitment to the company since the investor takes less risk than the entrepreneur
•Other social entrepreneurs prefer debt because it is quicker and let’s them retain control of the company

Entrepreneurs identify as Social Enterprises….
9
1
6
0
0
2
4
6
8
10
I am social
entrepreneur
I am an entrepreneur
Both a and b
None of the above
Entrepreneur: How do you identify yourself?
KSIX Study Sample
Non Profit
Impact first SE
Finance first SE

…and largely serve the poor
2
3
4
2
4
0
0
1
0
5
3
0
5
4
0
0
0
1
2
3
4
5
6
___% of my customers earn less the US$2/
day
___% of my customers earn more than
US$2/day but are still considered poor
___% of my customers are considered
middle class
___% of my customers are considered upper
class families
Entrepreneurs: What % of your customers fit the following description?
75-100
50-75
26-50
0-25

SEs are well educated but not from community
0
2
4
6
8
10
12
14
From the
community, but
have worked
abroad and
come back
From the
community and
have been
raised here
Not originally
from the
community
Not important
SE connection to community
Investor Preference
Entrepreneur Actual
0
2
4
6
8
10
12
SE Education
Investor Preference
Entrepreneur Actual

Entrepreneurs exceed the experience expectation of investors
0
1
2
3
4
5
6
7
8
9
10
Worked in
the same
sector but
commercially
Worked in a
different
sector, but
commercially
Worked in
social
enterprise in
the same
sector
Worked in
social
enterprise in
a different
sector
Not
important
Professional Background
Investor Preference
Entrepreneur Actual
0
1
2
3
4
5
6
7
8
9
0-2 years
2-5 years
5+ years
Not
important
Time in Existence
Investor Preference
Entrepreneur Actual

Entrepreneurs have larger management teams than expected…
1
8
3
0
1
0
4
8
2
1
0
2
4
6
8
10
Just the entrepreneur
1-3 people
3-5 people
5 -7 people
7 + people
How many people should be on the management team?
Entrepreneurs
Investors
13
11
9
3
3
1
16
14
15
3
1
9
0
5
10
15
20
CEO
CFO/ Financial lead
COO/ Operations Lead
Community Engagement
Leader
Purchasing and
Procurement Leader
Other
Ideal Management Team
Entrepreneur Response
Investor Response

…and have a variety of directors
4
3
3
1
2
1
6
7
0
1
2
3
4
5
6
7
8
not important
At least 1-3 people
At least 3-5 people
At least 5+ people
Number of people on Board of Directors
Entrepreneurs
Investor

Entrepreneurs have savings and portfolio companies have profits
1
0
1
3
0
0
0
1
2
2
1
1
3
4
3
2
0
1
2
3
4
5
Consistently positive cash
flow
Revenues are generally
higher than my costs
Accounts receivable are
higher than accounts payable
Have enough cash savings
to sustain themselves for 3
months
Investor: What proportion of your portfolio find the following statements true?
75-100
50-75
26-50
0-25
4
5
6
10
6
5
5
2
0
2
4
6
8
10
12
14
I have a consistently
positive cash flow
My revenues are
generally higher than my
costs
Accounts recievable are
higher than accounts
payable
I have enough cash
savings to sustain myself
for 3 months
Entrepreneur: Assess the following statements on your financial viability
Yes
No

Challenges facing Entrepreneurs

Entrepreneurs face challenges to scale
Barriers

Access to Finance is the primary challenge facing entrepreneurs
15
6
13
1
0
5
10
15
20
Funding only
Business Training
Access to other funders
Other
What sort of support do entrepreneurs need from investors?
A majority of start up funding comes from grants, donors and friends, but this is not sustainable and often inadequate
KSIX: Only 25% of enterprises are able to finance operations through earned income

Most businesses start with own money
13
11
5
7
4
11
5
1
11
8
4
12
1
8
2
1
0
2
4
6
8
10
12
14
Put their own money in or money raised through
personal networks (family, friends)
Money from business activities
Received a grant from the domestic government,
local foundations or company
Received a grant from a foreign government,
international foundations or global company
Received financial investment from the community
affected (not inclusive of revenue)
Taken loans and other sort of debt
Through partners or organizations that have given
me money in exchange for ownership (equity)
Other
Investors: How did entrepreneurs fund their business?
Entrepreneurs: How did you fund your business?
Entrepreneur
Investors

Entrepreneurs need to get timely funding and manage inputs…
3
0
5
0
3
4
0
1
4
4
2
2
6
2
7
3
1
0
3
3
4
4
4
1
1
3
3
3
0
1
2
2
7
4
1
6
3
2
3
1
4
4
1
0
2
4
6
8
10
12
14
16
Government regulations
Taxes and payment to government
Timely cash flow from investors
Managing materials needed for production
Managing and retaining employees and leadership team
Getting timely funding to meet costs
Meeting funding requirements of investors
Measuring Impact
Others
Entrepreneurs: What are the biggest challenges you face with your business?
5= very significant
1= Not signicant

….and investors recognize these challenges
1
2
3
4
2
2
2
1
2
1
0
3
1
5
4
4
5
1
3
1
1
1
2
0
1
1
3
1
3
4
3
3
0
2
3
2
0
1
0
2
1
2
1
4
4
1
1
0
1
2
1
3
3
0
2
4
6
8
10
12
14
Managing and retaining employees and leadership…
Meeting financial return requirements of investors
Meeting financial covenant requirements of investors
Measuring Impact
Understanding the Market
Others
Investors: What are the biggest challenges that SE face in running their business?
5=very significant
1= Not Significant

The Regulatory Environment can also be a challenge to Entrepreneurs
•Governments do not grant preferential tax status to social entrepreneurs
–Grants in Kenya are taxable
–World Bank: Entrepreneurs spend an average of 6 times per year with tax officials
–Former Development Marketplace social entrepreneur: Government would not let him register as a non-profit because he was generating an income

Entrepreneurs are constrained by licenses
•License application and fees can be cumbersome and costly
–Dairy farmers in Tanzania must have 5-7 licenses to get dairy to market
–KSIX: 61.5% of organizations are registered as “self help groups” because of the relative ease of registration
“Registering as a branch of a foreign company or Kenyan subsidiary company is expensive. Expect to pay upwards of US$8,000 in order to cover everything from incorporation / compliance formalities to obtaining work visas”.
- KopoKopo.com

Staffing acquisition is a tough
•Most social entrepreneurs interviewed cite finding good talent is a challenge
–Difficultly to entice talent to work for relatively small pay and less job security
–Talent often needs specialized skills on operations and local population
 Once talent is found, there is relatively less difficulty in retaining them

Most Investors do not want to make early stage investments, regardless of social mission
0
2
4
6
8
10
12
The companies were too early
stage for investment
We had did not have confidence in
the management team ability to
financially sustain the business
We did not have confidence in the
integrity of the entrepreneur
We did not believe that there was
a viable market for the
entrepreneurs idea
What were the reasons that you did NOT pursue deals that were in your pipeline?
Finance first 38%
Social first 54%
Other _ 8%
How would describe your investment mission?

Some investors provide a mixture of grants, debt and equity
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Grants
Zero interest loans
(including payment for
TA and other services)
Debt (including loans
for TA and other
services)
Quaisi equity
Equity
Other
What sort of financing do you provide?

Investors do not make high margins
On a $1M deal, a 3% fee is only
$30,000 over the lifetime of the investment
4
6
2
1
0
0
What is the management fee of the fund?
No management fee
1%- 3%
3% - 5%
5% - 7%
7% - 10%
Over 10%

Investors must address risks when investing
Risks

Domestic events in Kenya determine investor confidence
•Investors are concerned about post-election violence in 2013
–2008 post election violence displaced workers, destroyed inventory and supply chains
–Experts anticipate an increase in investment activity following peaceful elections
•Investors have less risky alternatives
–At prevailing interest rates, investors seek high returns on investment to put their money at risk

Kenya is sensitive to externalities
•Kenyan growth is linked to Eurozone crises
–Kenya’s main exports are dependent on European markets
–Kenya will be among the African countries to lose $10B in investment if Eurozone breaks
•Weather and supply chain changes play a role
–Dairy productivity and crop yields are subject to the amount of rainfall in a given year
–Health investments are subject to the actions of insurers, governments and new technology

FDI in Kenya responds to shocks
$-
$100.00
$200.00
$300.00
$400.00
$500.00
$600.00
$700.00
$800.00
2005
2006
2007
2008
2009
2010
2011 (est)
2012 (est)
FDI in BoP (net, $US Millions)
GDP Growth
Election Violence
Euro Crisis

Entrepreneurs and Investors agree on risk factors
2
3
1
4
2
1
1
0
4
5
2
5
5
4
2
1
3
3
2
3
3
3
2
1
1
2
1
2
0
2
0
3
1
0
0
0
2
4
6
8
10
12
14
16
Governance structure of SE
Liquidity of investment
Regulatory environment affecting social
enterprises
Technical skills of social entrepreneur
Ability of SE to get follow on financing
Systematic risk/ country risk
General risk factors to my sector
other
5= very significant
1= Not signicant
2
4
3
7
3
6
5
Number of Investors citing risk factors
Entrepreneurs: How important are the following risk factors that investors may consider before investing in your business

Investors would like to see more mature companies
3
11
1
0
0
0
2
4
6
8
10
12
Excellent
Good
Fair
Poor
No Understanding
Entrepreneurs: How would you judge your understanding on how to prepare financial statements for investors?
5
1
2
3
3
1
3
4
2
0
0
1
0
0
0
0
0
0
1
0
0
1
2
3
4
5
6
Excellent
Good
Fair
Poor
Not submitted
Investors: What percentage of your portfolio prepare financial statements at the given rating?
75-100
50-75
26-50
0-25
Five investors said that less than 25% of their portfolio give excellent statements

Investors look to be the first to invest…
•Investors look to protect their right to invest in companies by exercising exclusivity agreements and not sharing information
–These investments can be DEBT because it gives a structured exit and may require collateral
–Industries that do not have collateral, such as tech, often will only attract EQUITY investments, but valuation disagreements are not uncommon

… but would like investment partners
•Investors would also like to mitigate investment risk by following other investors or co-investing
–In this case, EQUITY investment can be used as there are others to share the risk
–Equity investments often seek board seats and technical assistance provisions
–In these cases a valuation is already in place and due diligence performed

Angel Investing is not prevalent
–Angel investing are largely a consortium of passive investors
–Currently unregulated and lacks frameworks
–Angel investors are more likely to invest in early stage companies
–Entrepreneurs like angel investors because of their hands off management style

The need for a good evaluation is important…
•Investors need to ensure risk protection
–Financial requirements of investment and patient capital require investor confidence that SE will reach financial and social objectives
•Due diligence (DD) is deeper when there is more risk
–“Harder” investments such as equity require deeper DD and will take longer
–DD involves financial evaluation, market assessment and legal

… however the cost of due diligence is significant
$15,000 to $20,0000
10% to 20%
Cost of performing due diligence inclusive of staff time, travel, legal evaluation and cost of experts
Portion of a transaction committed to due diligence
Represents
This is too costly for Investors

Revenue projections, Market projections and Management Team are all important in DD
10
9
5
6
8
8
10
5
5
8
8
0
15
8
4
10
7
10
14
8
8
11
15
1
0
2
4
6
8
10
12
14
16
Revenue
Debt to equity ratio
Inventory
Accounts Receivable and Payable
Liquidity
Solvency
Evaluation of Management Team
Evaluation of production process
Company Philosophy
Overhead costs
Market evaluation and Projections
Others (please list)
Financial metrics submitted/ sought in due dillegence
Entrepreneurs
Investors

Investors and Entrepreneurs Diverge

Entrepreneurs feel that that investors don’t understand challenges facing SEs
9
2
4
0
3
4
4
5
0
1
2
3
4
5
6
7
8
9
10
Investors have a good understand of the challenges
that they face through some of our previous
investment activities
Investors understand the challenges that they face,
but do not have experience in addressing them
Investors are familiar with the challenges that they
face
Unfamiliar with the problems and how to address
them
How well do investors know the challenges that SEs face in East Africa
Investor Response

But entrepreneurs don’t feel investors understand timely cash flow issues
1
1
3
0
3
3
4
3
1
1
2
4
3
3
0
1
2
1
4
3
1
2
2
4
4
1
5
3
1
0
2
0
0
1
3
2
0
0
1
1
2
3
0
1
1
0
2
4
6
8
10
12
Managing and retaining employees and leadership team
Meeting financial return requirements of investors
Meeting financial covenant requirements of investors
Measuring Impact
Entrepreneurs: Rate the investor understanding of the following issues
5= good understanding
1= No understanding

Entrepreneurs and Investors don’t agree on financial risk
3
3
3
3
4
2
0
5
4
3
1
6
2
1
0
1
2
3
4
5
6
7
Profitability
sources of financing
cash flow
management and…
customers
accounts receivable
other
What are special risks that investor consider when investing in SE?
Investor response
4
0
3
4
6
3
0
1
2
3
4
5
6
7
higher risk investment than
a similar commercial
investment
lower risk investment than
a similar commercial
investment
about the same
Are Social Enterprises financially riskier?
Investor response

There is agreement on financial benchmarks
6
2
0
4
4
3
1
6
5
4
5
9
4
0
1
3
2
2
0
1
0
1
2
2
1
2
1
0
0
0
1
1
0
2
4
6
8
10
12
14
16
Cash flow
Cash on hand
Value of assets
Profitability
Revenue growth
Cost Reduction
Others
Entrepreneurs: What benchmarks are most indicative of a SEs financial health?
Very Important
Somewhat Important
Not important
10
2
5
9
8
3
1
0
2
4
6
8
10
12
Cash flow
Cash on hand
Value of assets
Profitability
Revenue growth
Cost Reduction
Others
Investors: What are the most important indicators for financial health

Social metrics are important, but secondary to financial
3
4
3
0
0
1
2
3
4
5
Of greater interest than
financial metrics
Of equal interest to
financial metrics
Of lesser interest to
financial metrics
No interest at all
Entrepreneurs: What is the level of interest among your funders in impact metrics (relative to financial metrics)?
1
6
3
0
0
1
2
3
4
5
6
7
Of greater interest than
financial metrics
Of equal interest to
financial metrics
Of lesser interest to
financial metrics
No interest at all
Investors: What is your interest in collecting social metrics (relative to financial metrics)?

Job creation alone is a social enterprise
4
9
5
11
0
2
4
6
8
10
12
Yes
No
Should an enterprise that creates jobs only be considered a SE?
Entrepreneur
Investor

Social measurement is informal
2
0
5
3
4
7
5
0
0
1
2
3
4
5
6
7
8
Surveys
Word of mouth
tracking improvement over
baseline measures
Other
How are social impact measurements being tracked?
Investor Response
6
2
5
0
2
7
4
2
0
1
2
3
4
5
6
7
8
Investor provides metrics
to entrepreneur
Entrepreneur provides
metrics to investor
Investor and Entrepreneur
collaborate
Other
How are impact metrics developed?
Entrepreneur
Investor

While there is an agreement on social impact, financial metrics preside
7
0
1
10
0
1
0
5
10
15
Higher than a similar
commercial investment
Lower than a similar
commercial investment
About the same
How do the social benefits and social returns of a SE compare to similar commercial investments?
Investor Response
Social and environmental risks are externalities that need to be managed or pre-empted. It does not factor heavily into the investment decision

Technical Assistance would help entrepreneurs become more profitable….
Yes, 9
No, 7
Do you feel that a facility that would allow you to build business skills/ technical knowledge would make you a more profitable enterprise?
Most investors felt that more than 75% of their portfolio would be more profitable with technical assistance

….but less helpful to get more investors
7
4
4
0
1
2
3
4
5
6
7
8
Yes, I think that the training
would be helpful in attracting
and retaining funding
No, I feel that I have enough
business training already
No, I don’t think that business training will make a difference
Entrepreneurs: Do you feel that if you had more technical business training, you would get more funding opportunities from investors?
Investors feel that no more than 50% of their portfolio will get access to more funders through technical assistance

Risk Mitigation will increase deal flow
•Facilities that perform due diligence on behalf of investors will mitigate transaction costs
•Debt and equity guarantees will allow investors to deploy capital at less risk
•Developing investment communities, such as angel networks, will help investors share risks and coordinate investments
–Aligning with investors that provide different forms of capital can provide viable social enterprises with a continuous capital flow that will not disrupt its growth.

Crowdfunding is a new method to raising capital
•Organizations have been active in raising capital
–Kiva has arranged for $250M in MFI loans
–Kickstarter attracts $2M in pledges a week
•The USA JOBS act will allow for crowdfunding equity to investments

Emerging trends in Kenya will help the BoP
•Kenya looking to become a middle income country
–Vision 2030 is an economic blueprint to grow the Kenyan economy
–Commitment to farmers and infrastructure development pave the way for increase SE activity
•Faith based organizations are effective in reach BoP and making profits
–The National Council of Churches has a network of 27 churches and dispersed over 4 billion shillings to 700,000 client in microfinance

Other areas to research
Social Investor
Funders
Social Entrepreneur
Customer
Understand the influence of investors in social investment funds and implication on social impact
Impact assessment of social entrepreneurs on the customers and consumers
Comparative study on the supply and demand of capital in social enterprise in a mature social enterprise market, like India

Study Methodology and Resources

Study Methodology
•Interviews were conducted with social entrepreneurs, social investors and social entrepreneurship experts between February and April 2012 in Nairobi, Kenya and over the phone
•Interview subjects were sourced through on- the-ground research and through existing Development Marketplace networks

Interviewing Investors
•14 social investors were given a 49 question survey and interviewed directly by study lead
–Investors included foundations, NGOs, debt investors and equity investors
–Investors were largely based in Kenya, yet had a few investments in the East Africa community

Interviewing Entrepreneurs
•16 social entrepreneurs were given a 40 question survey and interviewed directly by study lead
–Entrepreneurs were a mix of pre-finance and post-finance, but all had interacted with investors
–Most entrepreneurs were operating in Kenya, though some had scaled to the region

KSIX Study
•Study results include results from KSIX “Social Investment in Kenya” study
–Allavida Kenya study purpose to set up Kenya Social Stock Exchange (KSIX)
–Study interviewed 40 investors and philanthropies and 39 social purpose enterprises
–Study interviewed candidates outsideof Nairobi in local languages
–Study is cited throughout report

Reporting
•Study results are a combination of
–Survey responses
–Free form comments during interviews
•Necessary to explore issues not addressed in survey
–Literature reviews
–KSIX results
–Comments from consultants and advisory firms in social enterprise space

Study challenges
•Survey fatigue
–As a result of a number of other organizations having interviewed investors and entrepreneurs on similar subject matter, investors were hesitant to participate and provide references to their portfolio companies
•Securing a variety of subjects
–Interview subjects were largely secured by word of mouth reference, which resulted in a bias toward Western raised and educated entrepreneurs operating in Kenya

Supply- Demand of Capital in SE- East Africa (sanitaized)

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