It’s 10 years since the term ‘impact investing‘ was coined to reflect investments that bring about social and environmental benefits alongside financial returns. Since then, the impact investing sector has grown to US$77 billion. For Durreen Shahnaz, an investment banker turned social entrepreneur from Bangladesh, impact investing seeks to “connect the Wall Streets of the world with the backstreets of underserved communities”.
But how realistic is this? How effectively are impact investors reaching the poorest urban communities? Many of the world’s 2.5 billion urban dwellers still lack access to clean drinking water, electricity, drains and toilets, to transport and low-cost housing. Impact investors mobilise capital to grow local businesses. But these businesses need water, sewers, electricity and roads. They need markets for selling their produce and storage to preserve their goods.
Only when basic infrastructure is in place can injections of new capital enable businesses to thrive and create jobs. Yet cities in the global South are often without such infrastructure. Local savings groups in Durban have mapped their settlements and are using this information to improve houses and infrastructure. These community-led processes can facilitate public and private investment in informal settlements.
Across the global South, low-income communities are often coming together themselves to develop their own ways to fund basic infrastructure. Savings schemes are one such way. The savings groups provide a platform for people to self-organise, enabling them to collectively negotiate with governments to get the services they need: they know their city, they know how to design infrastructure that works and they know where the gaps are in housing, water and sanitation.
In Uganda, the Jinja Municipal Council worked with the National Slum Dwellers Federation of Uganda to establish a community upgrading fund. As of 2014, the community fund had collected $161,949 from daily savings, helping more than 40,000 people. This fund supports community-led initiatives to provide toilets and water tanks and renovate health centres.
Read more: Are impact investors missing a trick by overlooking local communities? | Opinion | Eco-Business | Asia Pacific