Featured Impact Investor: S3IDF
The Firm
S3IDF uses its Social Merchant Bank Approach (SMBA) to provide entrepreneurs with three bundled services: leveraged co-financing, technology access and knowledge, and business development support. By tailoring the approach to local conditions and markets, S3IDF enables the poor access to employment, asset-creation and ownership opportunities, and basic services. Our project portfolio includes solar, biomass and biogas, water, and other technologies for small-scale industries.
S3IDF’s Perspective on Impact Investing
“Doing well while doing good.” This unofficial slogan of the impact investing community, which indicates that it is possible and expected to achieve both financial returns and social impact through investments into companies, rarely encourages discussion of what is truly meant by “doing well” and “doing good.”
At S3IDF they believe that too often impact investors fail to explore what financial returns are realistic given the complexity of certain types of social problems. Addressing complex issues in the world’s most difficult-to-serve communities simply costs more. Why?
Among myriad reasons are inefficient supply chains, weak infrastructure, ambiguous or counterproductive regulations and policies, and lower ability-to-pay and education levels of target consumers. Entrepreneurs that take on the challenge of delivering products and services under these conditions need more, sometimes significantly more, money, time, and support to achieve impact.
The issue is not that these entrepreneurs need more resources but that there are too few impact investors willing to trade market rate financial returns for additional high-value social impact. Until this changes, too many of the world’s most intractable problems will remain underfunded and unresolved.
S3IDF, as a conscientious investor, supports pioneering early-stage entrepreneurs that aim to improve lives and livelihoods in underserved communities. We recognize that in order to do so, entrepreneurs need to re-make markets to be more inclusive – a process that often involves trailblazing new business models and building out enabling infrastructure. The benefit is that impact is achieved on both the community level as well as on the market level, laying a strong foundation from which further development can be pursued and additional impact can be realized.
Accordingly, they assess entrepreneurs’ business models by considering their potential financial return relative to their expected direct impact on customers’ lives and livelihoods and their ability to confer other benefits within the local economy. We call on others to do the same. Together we can push impact investing to its next logical evolution to truly ensure that we are “Doing well while doing good.”
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