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US boosts public-private partnerships to grow impact investing

Source: Thu, 4 Sep 2014 22:08 GMT
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U.S. Agency for International Development head Rajiv Shah announces creation of the U.S. Global Development Lab to help end extreme poverty by 2030, in New York on April 3, 2014. REUTERS/Lucas Jackson
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SAN FRANCISCO (Thomson Reuters Foundation) - The United States on Thursday announced three public-private partnerships to boost private investment in early-stage enterprises in developing countries as part of its strategy to make impact investing and private sector partnerships a backbone of its development policy.

The U.S. Global Development Lab (Lab), part of the U.S. Agency for International Development (USAID), will invest $6.3 million in partnerships with Village Capital, Shell Foundation and Unitus Seed Fund, which, combined, are expected to create total benefits of almost $40 million.

These three alliances are the first to be formed through the Partnering to Accelerate Entrepreneurship (PACE) Initiative  from the Lab, with the goal of spurring innovations that accelerate the creation of promising, high growth and financially sustainable entrepreneurial ventures across the developing world.

Through partnering with incubators, accelerators and those who work with early-stage enterprises, PACE aims to identify innovations that help entrepreneurs to bridge the gap between high-risk, promising early-stage enterprises and impact investors looking for investment opportunities.

"Our agency is embracing a new model of development—one grounded in a focus on innovation, local leadership, public-private partnerships to accelerate the progress in challenging places," USAID head Rajiv Shah said in a statement released at the SOCAP social capital markets conference, which brings together social entrepreneurs, innovators and investors to increase the flow of money to enterprises geared towards social good.

"By partnering with proven organisations like Village Capital, Shell Foundation and Unitus Seed Fund, we will source, test and scale game-changing solutions that unlock opportunity for the world's most vulnerable people,” Shah said.

Impact investing, which generates measurable social or environmental benefits alongside financial returns, is gathering momentum as cash-strapped governments struggling to deal with poverty, broken health care systems, crime and ineffective education increasingly look for money from the private sector.

The Lab will support an impact fund that will allow Village Capital to boost its entrepreneurship programming in the agriculture, education, energy, financial inclusion and health sectors. Village Capital’s signature innovation in these programs is a peer-selection process—an approach that empowers entrepreneurs to participate in allocating capital to ventures working with marginalised populations and global environmental challenges. 

With the Shell Foundation, the Lab is supporting innovation in affordable energy solutions for low-income consumers. This will help energy innovators test game-changing technology, prove the viability of new business models and unlock further social investment, the USAID statement said.

The Lab will also support Unitas Seed Fund, a seed-stage impact investor, in its efforts to build a more robust entrepreneurship ecosystem in South Asia. Support from the Lab will allow Unitus to connect with quality impact entrepreneurs beyond major Indian urban centres, improve the quality of start-up business incubators and strengthen the advisory and support services to help grow early-stage impact businesses. 

Since 2001, USAID has built over 1,500 public-private partnerships involving more than 3,500 partner organisations, with an estimated value of more than $20 billion in public and private funds, the statement said. Across this portfolio, USAID has leveraged nearly $3 in partner contributions for every $1 of USAID funding.

(Editing by Lisa Anderson: lisa.b.anderson@thomsonreuters.com)

 

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