Impact investing in Southeast Asia
Over the years, the impact investment market has seen considerable growth in Southeast Asia. Although Southeast Asia’s economic growth in the last fifty years or so has been quite impressive, some of the cracks were too wide to be filled and needed help for complete resolution.
The widening socioeconomic gaps, poverty alleviation have been some of the areas that needed immediate attention and boost apart from state-led initiatives.
Impact investing in Southeast Asia: An overview
According to the Global Impact Investing Network (GIIN) report on impact investing in Southeast Asia, 2007-2017 saw private impact investors (PII) deploying $904 million to the region while about $11 billion was contributed for sustainable projects by Development Finance Institutions (DFIs).
Southeast Asia’s impact investment market largely revolves around sectors involving financial services, energy, and manufacturing.
“Together, these three sectors account for 82% of total capital deployed in the region,” the report mentions.
The GIIN report describes Southeast Asia’s impact investing market as “highly fragmented” owing to varying economic development & entrepreneurial ecosystems prevailing across countries. Political structures in the region also vary widely, prompting investors to develop country-specific strategies.
Impact investing in Southeast Asia: DFIs and PIIs
“Indonesia, the Philippines, and Vietnam each have comparatively mature impact investing ecosystems that have garnered increasing interest from PIIs,” the report states.
Countries like Laos, Myanmar, Thailand, Malaysia, East Timor, Singapore and Brunei have seen less PII activity whereas “Cambodia has attracted nearly as much PII capital as Indonesia, the Philippines, and Vietnam combined”.
A major chunk of impact investment in the region was carried by the DFIs until the PIIs gained momentum after 2013.
DFIs investments go into creating “large-scale employment opportunities and support countries’ national development priorities”. DFIs drive more targeted impact by investing in PIIs.
“By investing through PIIs, DFIs can target smaller enterprises than they otherwise could,” the report states.
The Road ahead
While the region opens up whole new vistas concerning impact investment, experts cite key challenges that need immediate tackling such as the early-stage funding gap. There is also the need to end reliance on foreign investments and focus more on the local investors and those who give precedence to small-scale investments over big-token deals.
Besides tackling these challenges, it is also imperative to focus on gender lens investing (GLI) in the region to bolster gender equality and promote women’s empowerment. There is also the need to tap new impact sectors.
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