How to Invest in Projects that Benefit Local Communities
Community development and impact investing are two concepts that have gained a lot of traction in recent years. Community development refers to the process of empowering local communities to participate in and lead their own development. Impact investing, on the other hand, involves investing in projects or businesses that have a positive social or environmental impact, in addition to generating financial returns.
When these two concepts are combined, they can be a powerful tool for creating sustainable development that benefits local communities. In this article, we will explore the relationship between community development and impact investing, and provide examples of how this approach is being used in Kenya and across Africa.
The Need for Community Development and Impact Investing
The traditional model of development, which is often driven by external actors, has not always been successful in achieving sustainable development outcomes. Too often, projects and investments are designed and implemented without considering the needs and perspectives of local communities. This can lead to projects that do not address the root causes of poverty and inequality, and may even have negative impacts on the environment and social fabric of the community.
Community development, by contrast, is a bottom-up approach that seeks to involve local communities in the development process. It recognizes that communities have their own knowledge, resources, and strengths, and seeks to build on these to create sustainable development outcomes.
Impact investing is another approach that seeks to address the limitations of traditional development models. It recognizes that investments can have a positive social and environmental impact, in addition to generating financial returns. Impact investors aim to achieve a “double bottom line” – both financial and social/environmental returns – and use their investments to create positive change in the world.
By combining community development and impact investing, it is possible to create projects and investments that are both financially sustainable and socially responsible. This approach can help to create lasting change in local communities, by empowering them to take ownership of their own development.
Examples of Community Development and Impact Investing in Kenya
Kenya is a country that has experienced significant economic growth in recent years, but this growth has not always been evenly distributed. Many communities in Kenya continue to face significant challenges, including poverty, lack of access to basic services, and environmental degradation.
In response to these challenges, a number of organizations in Kenya are using community development and impact investing approaches to create sustainable development outcomes. Here are a few examples:
Acumen Fund: Acumen Fund is a non-profit organization that invests in businesses that have the potential to create social and environmental impact. One of their investments in Kenya is in a company called Juhudi Kilimo, which provides loans and agricultural training to small-scale farmers. By investing in Juhudi Kilimo, Acumen Fund is not only generating financial returns, but also supporting the livelihoods of small-scale farmers and promoting sustainable agriculture practices.
Kenya Climate Ventures: Kenya Climate Ventures is a venture capital fund that invests in businesses that promote sustainable development and combat climate change. One of their investments is in a company called Sanivation, which provides clean and affordable sanitation services to communities in Kenya. By investing in Sanivation, Kenya Climate Ventures is not only generating financial returns but also improving access to basic services and promoting environmental sustainability.
Equity Bank: Equity Bank is a commercial bank in Kenya that has adopted a community development approach to banking. They have developed a program called “Wings to Fly,” which provides scholarships and mentorship to bright but disadvantaged students in Kenya. By investing in the education of these students, Equity Bank is not only creating social impact but also building a pipeline of talented young people who can contribute to the development of Kenya.
Examples of Community Development and Impact Investing in Africa
Community development and impact investing approaches are also being used in other parts of Africa to create sustainable development outcomes. Here are a few examples:
GroFin: GroFin is an impact investing firm that provides financing and business support to small and medium-sized enterprises (SMEs) in Africa and the Middle East. One of their investments is in a company called Jardin Majorelle, which produces and sells natural beauty products in Morocco. By investing in Jardin Majorelle, GroFin is not only generating financial returns but also supporting a local business that promotes sustainable agriculture practices and uses natural ingredients.
Investisseurs & Partenaires: Investisseurs & Partenaires is an impact investing firm that invests in SMEs in Africa. One of their investments is in a company called Kusuntu, which provides access to affordable solar energy products and services in rural areas of Senegal. By investing in Kusuntu, Investisseurs & Partenaires is not only generating financial returns but also improving access to clean energy and promoting environmental sustainability.
Root Capital: Root Capital is a non-profit organization that provides financing and business support to agricultural businesses in Africa and Latin America. One of their investments is in a cooperative of small-scale coffee farmers in Rwanda. By investing in this cooperative, Root Capital is not only generating financial returns, but also supporting the livelihoods of small-scale farmers and promoting sustainable agriculture practices.
Benefits and Challenges of Community Development and Impact Investing
There are many benefits to using a community development and impact investing approach to create sustainable development outcomes. First and foremost, this approach empowers local communities to take ownership of their own development. By involving communities in the development process, it ensures that projects are designed and implemented with their needs and perspectives in mind. This can lead to projects that are more effective, sustainable, and impactful in the long term.
Another benefit of this approach is that it creates a “double bottom line” – both financial and social/environmental returns. By investing in projects that have a positive social or environmental impact, impact investors can generate financial returns while also creating positive change in the world.
However, there are also challenges to using a community development and impact investing approach. One challenge is that it can be difficult to measure the social and environmental impact of investments. Unlike financial returns, which can be easily quantified, social and environmental impact is often more difficult to measure and evaluate.
Another challenge is that community development and impact investing approaches may not always align with the goals and objectives of traditional development agencies and donors. These agencies and donors may prioritize different outcomes, such as economic growth or poverty reduction, which may not always align with the social and environmental objectives of community development and impact investing approaches.
Conclusion
Community development and impact investing are two powerful tools that can be used to create sustainable development outcomes that benefit local communities. By involving communities in the development process and investing in projects that have a positive social and environmental impact, it is possible to create projects that are both financially sustainable and socially responsible.
In Kenya and across Africa, organizations are using community development and impact investing approaches to create lasting change in local communities. While there are challenges to this approach, the benefits – both for communities and for investors – are clear. As we work to achieve the Sustainable Development Goals and create a more just and sustainable world, community development and impact investing will continue to play an important role in achieving these objectives.