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Why Impact Investments are Preferred over Return Investment

Accion, Greycroft Partners, GreenTech Capital , Erick Yong, AgroCenta, ARED,

The African startups have in the recent past received more funding. This is in comparison to the previous years. The number of investors who are coming in to fund those startups is also on the rise.  In the past investors were only focused on securing returns from their investments. Currently, they are more focused on sustainable investment. In 2017 alone, African startups raised funding worth $195 million. This is according to Disrupt Africa African Tech Startups Funding Report released recently. However, the dominant investors like Accion are joined by other firms such as 500 Startups and Greycroft Partners. This makes the investment space more competitive than before.

Furthermore, the existing African investors are changing their way of approach. More funds go to economically sustainable solutions. This is according to CEO of GreenTech Capital Mr. Erick Yong. The funds are also used to get opportunities that will generate profit. GreenTech Capital invested in many startups like AgroCenta from Ghana. It also invested in ARED from Rwanda and Farmcrowdy from Nigeria. The change in the way of investment will continue as the investors try to double their funding. But the investors should be keen on where they channel their money. The level of sustainability should also be their concern.

There is no big difference between impact investors and traditional venture capitalists (VCs). The common goal for both is making money.  There is an increase in the impact investment in Africa. This is according to research carried out by Global Impact Investing Network (GIIN).  Furthermore, many investors consider environmental, corporate or social governance (ESG) criteria. The ESG will be carried out using assets worth $8.19 trillion. Therefore the ESG criteria will go up by 69% from 2016. But, impact investment is not affecting traditional investment.  Instead, it creates a new roadmap for mainstream investment. Furthermore, it only tries to move from value creation to new innovative ways. The innovative ways are also changed from almost unlikely ones to the riskiest avenues. The avenues have increased the financial returns incorporating non-financial look. However, the growth of the impact investment shows that the positive returns are on the rise.

The upcoming investors will ensure that there is growth in the investment industry. This will be possible through making financial decisions for inclusive and expansive growth. The move will be of much help to sub-Saharan Africa. Industries in the region are developing business models that get positive results. The models also ensure a positive impact on the ecosystem.

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Written by Denis Opudo

Am an engineer who's a tech blogger, hit me up on dennis@techinafrica.com and we base our discussion on technology in Africa and the rest of the world.
Denis the Tech guru

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