The UNDP Impact investment report in Africa provides an overview of the state of impact investing in Africa, including its definition, history, and key players. It notes that Impact investment constitutes one of the more proactive and promising approaches on the responsible investment continuum, representing a huge opportunity to contribute to the implementation of the Sustainable Development Goals (SDGs), as well as the funding of inclusive and green businesses. The report therefore aims to contribute to UNDP’s growing body of knowledge products and solutions and in this case, to highlight innovative finance vehicles that contribute to inclusive growth in Africa as in UNDP 2013 “Realizing Africa’s Wealth – Building Inclusive Businesses for Shared Prosperity” Report.  However, the report highlights that the impact investing market in Africa is still relatively small and faces a range of constraints that limit its growth and impact.

One of the key challenges facing impact investing in Africa is a lack of supportive policies and regulations. The report notes that many African countries lack an enabling environment for impact investing, including supportive legal and regulatory frameworks, tax incentives, and access to information. This creates uncertainties and risks for impact investors and reduces the availability of finance for impact-focused enterprises.

Another constraint highlighted by the report is limited access to finance. The report notes that most impact investments in Africa are small and require patient, long-term capital, which is often not available from traditional sources of finance. This creates a funding gap for impact-focused enterprises, particularly those in rural and remote areas.

In addition to these challenges, the report notes that there is a lack of infrastructure and human capacity to support impact investing in Africa. This includes limited access to data and information, a shortage of skilled professionals, and inadequate support services, such as business incubators and accelerators.

To address these challenges, the report provides a range of recommendations for policymakers, investors, and other stakeholders. These include:

a. Creating an enabling environment for impact investing by developing supportive policies and regulations, including tax incentives, legal frameworks, and regulatory standards.

b. Improving access to finance for impact-focused enterprises, particularly through innovative financing mechanisms such as blended finance, impact bonds, and crowdfunding.

c. Building capacity and skills among stakeholders, including impact investors, entrepreneurs, and policymakers, to enhance the effectiveness and impact of impact investing.

d. Promoting collaboration and knowledge sharing among stakeholders, including through partnerships, networks, and platforms, to catalyze the growth of the impact investing ecosystem in Africa. The report concludes that impact investing has significant potential to contribute to sustainable development in Africa, but concerted efforts are needed to unlock this potential. The recommendations provided by the report offer a roadmap for policymakers, investors, and other stakeholders to overcome the constraints and realize the opportunities of impact investing in Africa. Click here to download the report