<h1 style="text-align:center;">U.S. Investors Offer Something Different to Africa</h1>“The U.S. wants to invest in Africa? [pause] Really?” Looking slowly over his shoulder, he leans in and whispers…”It’s about time. Where have you been?” These are not the words of one of the hundreds of small- to medium-size business owners RENEW has been meeting with. These are the words of a well-established business man who has worked relentlessly for years, and long since transcended the upper echelons of the Ugandan society. I have seen and heard variations of this same astonished reaction from many meetings with business men and women here in Uganda. Many are in no need of investment capital. They are not trying to impress me. They just want something different. They generally describe this difference in two forms. The first has to do with the U.S. brand. The U.S. brings with it standards and ethics like no other country in the world (these are their words). Other countries that have successfully been investing in Africa for years, don’t generally focus on raising the standards and ethics while simultaneously making profits. Rather they focus on the latter. This is understood, they recognize, but not optimal. I’ll save the elaboration on this point for a later post.The second reason, which I will go into, is that the current approach the U.S. takes with Africa is not working (again, their words). U.S. resources, both money and people, flow into Africa in large quantities in the form of aid. The target recipients are the poor (a large and in-need group) and the government (a small group). We’ve seen results, true. But are they the best return on the dollar and manpower?Well, let’s take a closer look at this equation. One can quickly see a critical sector that misses the direct benefits of these U.S. resources. The business community. One could argue (and some try) that business owners are a benefactor of aid through things like improved roads, clean water and electricity that the government provides. Take one drive around Kampala and you will have some questions. No. The reality is businesses fend for themselves. Being a capitalist I am OK with rough conditions; it drives innovation. But, for capitalism to succeed — and thus create taxes, provide jobs and build up a stable middle class — you need capital. So, banks start growing, and charging handsome fees to outweigh their risks. If a business is lucky enough to get a loan it most likely goes towards expenses that could be minimized by an effective government. Namely they buy generators to keep their manufacturing plants operational because electricity shuts off multiple times a day. They pay for vehicle maintenance because the roads rattle their cars apart. They pay for unhealthy and sick workers because waterborne pathogens and malaria are commonplace.So, one could deduce that the current flow of resources into Africa has not targeted the one group that could potentially be the solution for advancing development, making it “sustainable”, and directly eliminating all of those wonderful problems that many NGO’s build their mission statements around. But, there is doubt in the voice of my affluent friend who is clearly wondering if this new approach will really happen - this “U.S. investing in Africa.” They naturally go onto to ask “How will you do it?”For the past two years RENEW has been diligently trying to build a business-understanding of Africa. We recognized early on just how important it would be to “go slow to go fast” with this new approach. We knew that well before we could operate in Africa, we would need to understand our stakeholders’ wants and needs; we would need to have a strong formal and informal networks within each country to advise us, guide us and vet opportunities with; and we would need an information technology- and process-driven system that would make our operations efficient and cost-effective to the IAN. After over two years of focusing almost exclusively on working “on our business”, these three pillars (service, relationships and systems) have become the foundation of our operational model. And since RENEW has been operational in East Africa since October, this model has proven itself to be very successful.With our fundamentals in place, we have been busy defining our country-strategies for Uganda and Kenya. Starting from the top, RENEW’s desire is to help build amazing businesses by using an investment approach that ensures both a financial and social return. This is done by directing U.S. resources (money and people) towards businesses with high growth potential. Although new, this model of market-driven development has been proven to be successful by many other brilliant scholars, and continues to be written about in the news. Therefore, I will not go into unpacking the details of this model here, but rather say RENEW is focused on putting it to work.We are looking along strategic supply chains like healthcare, agribusiness, land development and energy. We seek out the ethical, visionary and strategic. In just under two months RENEW’s business model has borne fruit. We have found some diamonds in these rough middle markets, and it is time to change the hesitation in the voice of our affluent, local friends by showing them that the U.S. is ready for change—that we see the potential and that it’s time for a new equation. One that bring ethics and standards with capital. One that is sustainable. One that works.

”It’s about time. Where have you been?”

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U.S. Investors Offer Something Different to Africa

<h1 style="text-align:center;">Financial Services Over the Longhaul: Lessons from Recessions</h1>There’s no question that portfolios managed by financial services and wealth management firms have taken a nearly unrelenting beating in the past six months. That bodes ill for everyone, from retirees to entrepreneurs just starting out. In some ways, all the red ink can make impact investing seem like an indulgence–an idea only fit for flush times. But as Kevin Jones at <a href="http://www.goodcap.net/">Good Capital</a> writes, “When the existing system is at risk, people are willing to ask a new set of questions and take a look at new ways of doing things. For the people who believe you never could divorce economic from social value, the new reality creates a window of opportunity.”As social value becomes more “real” to investors, RENEW sees a window of opportunity opening for wealth managers, who can now offer to capture and present social returns as part the portfolios they build for clients. The prospect of capturing social value in client portfolios provides a distinct competitive edge at a time when wealth managers are reeling from losses and defending their value to clients. Social value, approached with the same thoughtful, measured method that financial firms are now re-emphasizing in their portfolios, amounts to a new service offering that can help investors capture and enjoy all the value their investments are creating.Not only is the economic crisis forcing investors to consider the social impact–positive and negative–of finance; we’re also learning that a range of investments, particularly those outside of sectors and regions traditionally regarded as “safe,” can actually insulate investors against downturns. This was one of three findings in a study published in the December 2008 Harvard Business Review, titled “Lessons from the Past for Financial Services.”Authors Matthew Sebag-Montefiore and Nuno Monteiro analyzed seven downturns affecting 600 North American and Western European companies in banking, asset management, consumer finance, insurance, investment, and specialty finance over the past 28 years. Among the recommendations that emerge from this research: “Banks that were high performers in the early phases of the current downturn drew, on average, nearly 10% of their revenues from outside North America and Western Europe prior to the softening. That’s compared with 4% for low performers.”Investments in small and medium-sized businesses in emerging economies certainly come with their own set of risks. But if the recent financial collapse is teaching us anything, it’s clear that creatively diversified portfolios are more valuable than ever.

There’s no question that portfolios have taken beating in the past six months.

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Financial Services Over the Longhaul: Lessons from Recessions

<h1 style="text-align:center;">Never Waste a Good Crisis</h1>This entry is cross-posted on <a href="http://www.nextbillion.net/blog/2009/03/17/never-waste-a-good-crisis">NextBillion.net</a>.President Obama and Secretary of State Hillary Clinton are fond of <a href="http://www.reuters.com/article/environmentNews/idUSTRE5251VN20090306">reminding</a> the press that leaders should “never waste a good crisis.” During times of upheaval, people are scared, but they’re also willing to try something different. That applies in both the political and <a href="http://hbr.harvardbusiness.org/2009/02/seize-advantage-in-a-downturn/ar/1">business worlds</a>.RENEW was launched in the midst of upheaval. Incorporated two years ago because we saw an opportunity to grow small businesses in developing markets, RENEW was designed to implement a set of new ideas about what investors who rethink their model can accomplish in markets largely “hidden” by their lack of structure.Of course, another sort of upheaval quickly followed. Just as RENEW launched its on-the-ground operations in East Africa in November, global markets fell into disarray. The fallout is still falling out. In the meantime, RENEW, one company among many in the burgeoning BOP/double bottom-line/social enterprise/pick-your-descriptor marketplace, is determined not to “waste” the present financial crisis.First, the basics: RENEW is a social investment intermediary that sources SMEs for U.S.-based investors, conducts due diligence, manages the investment, and provides life of the investment consulting to support business growth and gauge social impact. In the strictest sense, those are its service offerings. But during the two years that the company has been working with investors and entrepreneurs, we’ve come to envision more than the addition of an investment intermediary to the marketplace.We see an opportunity to create a new set of expectations between capital and the entrepreneurs and managers who shape investment capital into enterprises that create value and generate return. We believe investors should be able to generate meaningful financial return and see sound governance at work when they deploy capital to SMEs in developing countries. And we believe that managers of these SMEs should hold themselves and their employees to the sort of ethical and operational standards that will allow them to compete globally in the 21st century.We’re not the only ones. Last summer, a group of 35 scholars and business executives assembled to lay out a road map for reinventing management to make it more relevant to a volatile world. (These findings comprise a February 2009 Harvard Business Review article titled <a href="http://hbr.harvardbusiness.org/2009/02/moon-shots-for-management/ar/1">Moon Shots for Management</a>.) The group, which included luminaries like C.K. Prahalad and others familiar to NextBillion.net readers, was inspired by a collective desire to help managers overcome what they call “ambition-deficit disorder. What, we asked ourselves, was management’s equivalent to unpacking the human genome, inventing a cure for AIDS, or reversing global warming?”The group synthesized its discussions into a list of 25 grand challenges for managers in the 21st century. At least half of these will make immediate sense to many NextBillion regulars. (For example: "#1 Ensure that the work of management serves a higher purpose; #2 Fully embed the ideas of community and citizenship in management systems; #13 Develop holistic performance measures; #22 Enable communities of passion; #23 Retool management for an open world.”)Similarly, throughout the course of RENEW’s initial market research on investors in the United States and managers in the developing world, we saw “ambition-deficit disorder.” To be sure, in some areas investors exhibited <a href="http://www.wired.com/techbiz/it/magazine/17-03/wp_quant">too much ambition</a>; financial markets are undergoing severe corrections as a result. But when it comes to the fundamentals of finding, investing in and building ethical, well-managed businesses, capital markets have not been keeping up with what’s going on in developing countries. To a large degree, illusory returns in developed capital markets obscured real opportunities in new markets. Take this growing business in Kampala, for instance. In fact, the same February 2009 issue of the Harvard Business Review cited above featured an article titled <a href="http://hbr.harvardbusiness.org/web/2009/hbr-list/now-the-time-to-invest-in-africa">Now’s the Time to Invest in Africa</a> as one of HBR’s “Breakthrough Ideas for 2009.” The managing director of the International Monetary Fund, speaking this week at a conference in Tanzania to examine the effect of the financial crisis on low-income countries, <a href="http://www.imf.org/external/np/speeches/2009/031009.htm">said</a> much the same thing.There is opportunity aplenty in the midst of this crisis. The “Moon Shots” group and others working to create a shared code of conduct for managers, taken together with recent studies on the prospect of a true impact investing marketplace (see the Monitor Group’s excellent report) offer an alternative to the myopic view that investors and managers tend to suffer from as they evaluate investment opportunities and craft strategies for business growth. Renew aims with its services to provide a template — and real-life examples — of how impact investing meets better management in practice. But we are one small part of a large marketplace. No one with similar goals should waste this crisis.

During times of upheaval, people are scared, but they’re also willing to try something different.

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Never Waste a Good Crisis

<h1 style="text-align:center;">Q&amp;A: RENEW in 2012</h1> The year 2012 is going to be about investment and growth for the RENEW team. We will continue to work with development partners to facilitate impact investing into small and medium enterprises (SMEs) in frontier markets, and we will be building a permanent presence in Addis Ababa, Ethiopia.<figure class="image"><img src="/uploads/ethiopia_pipline_diagram_1_6d9269073b.png"></figure>Our goals include opening our office in Addis, working with strategic development partners on our public-private-partnership model for impact investing, continuing to build our SME investment portfolio, and closing on an investment. We are keen on the following sectors: private healthcare, agriculture, manufacturing, transportation and logistics, ICT and construction.Below are some questions you may have about what we are doing, and our best attempt at concise answers.Why focus on SMEs? Short answer – because SMEs have the potential to create social impact and good financial returns.Social impact<ul><li>SMEs are the engines of growth in developing countries – the International Finance Corporation (IFC) indicates that formal SMEs contribute up to 45 percent of employment and up to 33 percent of GDP in developing economies; these numbers are significantly higher when taking into account the estimated contributions of SMEs operating in the informal sector. Thus, focusing on strategies to help SMEs grow is a social motivator for RENEW.</li><li>The greatest barrier to growth for SMEs in developing countries (second only to electricity) is access to affordable finance. Thus, there is significant demand for capital in developing countries.</li></ul>Financial returns<ul><li>SMEs are very risky, and foreign investors can’t just fly into a developing country, drop off a bag of money and expect it to go smoothly. But, if done well, investments in SMEs generate good returns, especially for angelic investors who have the right risk tolerance and skill to pick good early-stage ventures.</li><li>SMEs are a great entry point for foreign investors. They often require between $100K and $5M, which allows investors to explore developing countries before pursuing larger investments. SMEs also allow individuals, or a small group to make a few investments to hedge their risk.</li></ul>Why Ethiopia? Ethiopia will grow by 7.5% this year, without a drop of oil to export. Ethiopia’s projected GDP growth in 2012 makes it the 8th fastest growing country in 2012. Yes, the government can be bureaucratic, but doesn’t have the corruption issues seen in other countries. And, we just like it there.What is your public-private-partnerships model? Our model takes a different approach from most development projects. Our model focuses on the investor and the SME, where other projects mainly focus on the SME. The model significantly reduces the barriers preventing high net-worth individuals (HNWIs) from becoming active impact investors by walking them through the investment process, step by step. We do this by working with development organizations like USAID, DFID and the World Bank to establish a platform to increase the number of impact investments being made into SMEs in frontier markets like Ethiopia, Libya and Afghanistan. Once the platform has been established, and enough investments have been made, it becomes sustainable through private funding much like a traditional equity fund.Who are your investors and where do they come from? In short – our investors come from a network of people we have developed relationships with over the years. We continue to invest in our network and meet almost all of our prospective investors through word-of-mouth.What’s unique about what you are doing? We focus on serving the investor. We act as an outsourced fund management team for HNWIs who want to experience their investment by visiting the country, meeting with businesses, reviewing the financials, and making their own decisions about where they will invest; but they don’t want to move to the country to oversee their investment. We offer them a platform to do this.Why private healthcare, agriculture, manufacturing, transportation and logistics, ICT and construction? First, because we are most familiar with these sectors, having investigated them for years. Second, we feel these are growth industries as Africa’s population continues to expand and require basic infrastructure and health needs.How do you mitigate your risks? By partnering with strong, innovative development organizations that are seeking to implement new partnership models with the private sector; finding and working with great local partners; and sourcing SMEs with exceptional management teams.

This year is going to be about investment and growth for the RENEW team.

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Q&A: RENEW in 2012

<h1 style="text-align:center;">Chapter Chairs Named in Wilmington, Washington, D.C., and Charlotte</h1> The Impact Angel Network named chapter chairs for the Wilmington, Delaware, Washington, D.C. and Charlotte, North Carolina chapters in July.This year’s chairs are Jeff and Donna Turi in Wilmington, Dr. Andrew Umhau in Washington, D.C. and Alan Gardner in Charlotte. Members of each chapter meet regularly to review investment opportunities and take trips to Africa to look at investments and advise on the growth of their portfolio companies. Members of the chapters have invested in three businesses in Ethiopia within the past year: Metad Agricultural Development PLC, an Ethiopian specialty coffee company, Mama Fresh Injera PLC, an Ethiopian commercial manufacturer and exporter of fresh-baked injera, and <a href="../2013/renew-facilitates-investment-dventus-technologies.html">dVentus Technologies PLC</a>, a clean energy company.In addition to the three current chapters, network members live in Texas, Georgia, Minnesota and California. Network members are accredited investors who believe in using market-based solutions for wealth creation in Africa. Members have exclusive access to RENEW’s investment pipeline, and take regular, guided trips to Africa to assess opportunities, attend board meetings, consult with companies, meet with diplomats and government leaders and experience new cultures.<figure class="image"><img src="/uploads/photo_d_c_chapter_june_2014_9368f86f7a.jpg"></figure>

The Impact Angel Network names chairs for 2014 - 2015 in three cities across the U.S.

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Chapter Chairs Named in Wilmington, Washington, D.C., and Charlotte

<h1 style="text-align:center;">A Case for Impact Investing, Cont.</h1>What if the solution to global poverty didn’t rest in the hands of a few Harvard economists, or executives from the World Bank, or some leading development experts on retainer in Ghana? Not in a massive government building, nor within the ivy-laden walls of a university, nor at the podium of the United Nations. What if the solution is in the mind of a Ugandan seed producer and a business-savvy American? RENEW believes that a significant piece of the poverty puzzle can be solved when such a tourist meets a passionate, hard-working entrepreneur — particularly when this happens 100,000 times over.In our January 23, 2009 post, we met the Ugandan entrepreneur. Now let’s meet our tourist. Keep in mind, it may be you or someone you know. They’re your neighbor down the road, your friend Tom. The one that just took that safari last summer. If you were traveling with him, this is what you may have seen…After an amazing journey through some of the most rugged and beautiful land on the planet, and seeing a spectacular range of wildlife, Tom was convinced that he and his family had truly experienced Africa. On his way back from the reserve, his kids got thirsty, so Tom stopped by a small store on the roadside to get some drinks. Stepping out of the Land Rover, he was immediately surrounded by a group of children begging for money. Because Tom’s a compassionate person, and because he just spent $5,000 on a safari, guilt causes him to hand over some spare change from his pocket. The four children scuffle to divvy up the loot.As he walked into the store, three vendors immediately surrounded him trying to get Tom to buy from them – “all the stores are the same,” Tom thought. Trying his best to drown out their pleas, he finally found what seemed acceptable and bought four warm Cokes. After he handed off a few bills from his wallet to the lucky vendor, he noticed the other two peacefully turn away and return to their respective perches, waiting for the next tourist to come by. As Tom climbed back into his SUV and headed for the airport, he was noticeably distant, gripped with cognitive dissonance — Africa is beautiful and full of potential, and yet gripped in poverty.You watch Tom contemplate this dilemma in his head, idly staring out the window at the distant city skyline. You notice that Tom seemed troubled during the entire flight home. After what seemed to be hours of squirming in his seat, Tom leaned over to his wife and started with his famous “what if.” You’ve seen this before — Tom starts in: “What if those were our kids on the street?” “What if I was that vendor and that was my business?” “What if I hadn’t been raised on Elm Street, but in a back ally of Nairobi?” “What if I didn’t get an education, or have that amazing teacher?” He asks these, not expecting an answer, but searching for resolution.His thoughts wander back to what it was like growing up in America. He went to high school, fell in love and graduated from college. He worked for a good company, and after a few years of making a name for himself, he and some friends had an idea. They wrote out a business plan, moonlighted for a few months, scrounged up some money from friends and family, and went full-time to work on their dream. They got the business going, and then got a loan from a local bank. Ten years later they sold the company, made a few million and went their separate ways. Tom was now trying to spend some much deserved time with his family. His kids had been talking about Africa ever since they saw some movie in school about the civil war in Sudan, and they pleaded with him to take them on an adventure. Just excited to see his children interested in something other than Xbox or American Idol, Tom jumped at the opportunity; he was ready for an adventure too. So he contacted his travel agent, booked a flight and there they were in Africa…Now we get to ask “what if.” What if Tom had a way to deal with his dilemma? What if he were able to shift his association of Africa with poverty to Africa with opportunity? What if he were able to zoom out, and see the economic development that could occur if provided the right support? What if Tom had not gotten out of his Land Rover, and instead, driven to the industrial park on the outskirts of the city? What if Tom would have met the business owner in need of capital and support (<a href="company-profile-case-impact-investment.html">Read that story</a>)? After all, she had employed the mothers of the children Tom had met that day. What if they had a conversation, and the owner told a story of a vision she had to start a company that employed women and supported a growing industry in her country, one that would provide seeds and jobs to thousands of small farmers?But instead: she sadly explains that she had to let some of her workers go last month. The interest rates on the bank loan she had to take to meet the demand of a contract that didn’t yield the profit she needed to keep the employees on once the contract was over.Here’s the secret that the scholars, economists and experts haven’t grasped: The solution to poverty will become clear when Tom, and the thousands of others who have had similar experiences, meet the business owner and begin a business relationship; one that unlocks the vision and potential within the entrepreneur, and addresses the dilemma within Tom. The interaction, and thousands like it, will shift the way that we in the West see Africa. But first, Tom must encounter the entrepreneur.Stay tuned…

What if the solution is in the mind of a Ugandan seed producer and a business-savvy American?

A Case for Impact Investing, Cont.

<h1 style="text-align:center;">When People are in Need, Charity is Tempting</h1>Charity is tempting, but ultimately unproductive. Today’s Washington Post has a story titled, “World Bank Cuts Growth Forecast for Developing Nations” (some regions, like Sub-Saharan Africa, are still growing though, unlike the West). A headline like this sends people immediately into a scramble for foreign aid and charitable giving to offset the pain these countries are feeling. Not so fast, writes the Post:“The assumption is that just mechanically pouring money and credits into poor countries makes them have higher growth,” [William Easterly] said. “We have 60 years of evidence against this proposition — lots of money pouring in without discernible growth effects.”"Perhaps the best way for wealthy countries to help the rest of the world is to get their own economies back in gear," said Harry Broadman, a former World Bank official and now managing director of the Albright Group.“First and foremost, the engine of growth is not going to be aid,” he said. “It’s going to be the boost in external demand from growth occurring in the industrialized countries.”All the better if that growth in rich countries is directly fueled by the success of businesses in developing countries. Concerned individuals in the US and other Western countries need to approach the need in developing countries as a business problem, not a charity problem.

Charity is tempting, but ultimately unproductive.

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When People are in Need, Charity is Tempting

<h1 style="text-align:center;">Application for Online Marketplace</h1>By completing RENEW’s application, business owners and managers can activate eligibility to be represented in RENEW’s virtual marketplace. The application should only take a few minutes to complete, and will provide potential investors with relevant information on your company.UPDATE (December 2011): This application is no longer available. To be considered for RENEW's portfolio, please <a href="https://www.renewcapital.com/contact">contact us.</a>

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Application for Online Marketplace

<h1 style="text-align:center;">Part 1: Impact investing: Transferring wealth, wisdom and values between generations</h1>Parents, let’s begin with a quiz: Have you heard of impact investing (#impinv)? How about social entrepreneurship (#socent)? How about Ashoka, GIIN, ANDE, Kiva or Acumen? If you know what impact investing is, or of any of these organizations, your cool status with your kids may be higher than you think. If you're scratching your head right now, you’re not alone.<figure class="image"><img src="/uploads/2014_februrary_ean1_7e50a8b81a.jpg"></figure>The impact investment movement is happening...it’s a hot new field of finance that blends social and environmental impact alongside financial returns. J.P. Morgan predicts that the impact investing market will equate to more than a trillion-dollar by 2020. J.P. Morgan also says the industry size has jumped 20% from last year to $46B under management.* You can bet big firms like Goldman Sachs are working hard to design impact investment products for their wealthy clients. The popularity of impact investing is also growing on college campuses around the country. Thousands of students at top tier universities are enrolling in impact investment and social entrepreneurship courses, attending conferences and seeking careers in the impact investment space.* Impact investing is heating up in Washington, D.C., too, where earlier this month a group of heavy-hitting philanthropists and investors met at the White House to pledge $1.5B to impact investing, and USAID, OPIC and SBA all pledged to support impact investing.* The trend and related industry is clearly growing.So what is impact investing? There are many definitions related to the many types of impact investments and investors out there. But, here's my definition: impact investing is Warren Buffet meets Indiana Jones meets Mother Teresa. RENEW investments are made into high-potential, fast-growing companies in Africa where capital is scarce but opportunity is ripe. This is not like the billions being thrown into tech companies solving first-world problems. These investments are addressing real challenges around the world; think of a bread company in Ethiopia that employs 200 people and makes a good profit margin. Our investors use their capital to unlock growth in these companies, create jobs and generate financial returns. The social problems we are addressing lead to “healthy” economic development – growth in the middle market. It’s risky and deeply fulfilling. More formal definitions typically say something to the effect that impact investing is a field of finance that seeks to create measurable financial and social and/or environmental returns for investors.In the U.S. we are about to experience the greatest transfer of wealth in history; roughly $30 trillion is going to pass from retiring Baby Boomers to their children during the next 30 years.* Yet from discussions I have had with parents and wealth managers, it is often difficult for the generations to connect around shared values and a vision for how that wealth should be managed. And from what I’ve seen firsthand, impact investing has the potential to be a powerful bridge between generations.