An Emerging Market for Social Investment in Vietnam

Breakout session: Mainstreaming social entrepreneurship in development aid Grants as challenge investment fund

August 22, 2013 Hanoi Randolph Flay

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NEW PERSPECTIVES

Why should bilateral donors care about social impact investing?

(and in broader private sector engagement in socio-economic development outcomes)
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The World Has Changed

Private resource flows dwarf ODA

Engine of Economic Growth

Private sector fuels economic growth, innovation and job creation, sustainability JP Morgan estimates $1 trillion over the next decade in developing country investment opportunities

Broad-Based Development Impact

Private sector interests increasingly align with development goals; opportunity to tap private sector skills, resources and technologies to drive more innovative, cost-effective development solutions across all USAID priority areas 93% of CEOs believe that sustainability issues will be critical to the future success of their business

Sustainability and Scale

Market-led private sector approaches often increase the sustainability of development efforts, and global corporations bring an ability to scale solutions Scale: 53 of the 100 largest economies in the world are companies; P&G reaches 4 billion customers
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U.S. RESOURCE FLOWS TO THE DEVELOPING WORLD IN 2009: $226.2 BILLION

Total Private Philanthropy 16%
Public Flows (ODA) 13%

Remittances 40% Remittances 40%

Private Flows 31%

U.S. Official Development Assistance - 13% U.S. Remittances - 40% Corporations - 4% Volunteerism - 1% Religious Organizations - 3%

U.S. Private Capital Flows - 31% Foundations - 2% Private and Voluntary Organizations - 5% Universities and Colleges - 1%

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THE CHALLENGE

How can bilateral donors reduce the barriers to social investing and what tools are helpful?

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MODELS OF SOCIAL INVESTMENT SUPPORT

Challenge Grants Development Innovation Ventures
Purpose: To support cutting each social and economic development ideas from inception to scale-up and realization

Global Development Alliances

Purpose: To leverage private sector and public sector (donor) resources to address social and economic development challenges.

Development Credit Authority

Development Grants Program

Purpose: To develop the capacity of local organizations engaged in social and economic development that have not worked extensively before with USAID.

Purpose: To encourage private sector banks to begin investing in new social and economic sectors by reducing the risk.

Encourages social enterprises to think big and focus on scale-up and viability of interventions.

Combines unique resources. Demonstrates the financial value of engagement in social sectors. Provides better financial sustainability for social interventions.

Reduces perception of risk for lenders. Establishes relationships between organizations and lenders.
Improves financial sustainability of social interventions.

Raises organization capacity.

Innovation & Scale

Partnerships & Resources

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Market for Investment

Organizational Capacity
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DEVELOPMENT INNOVATION VENTURES (DIV)

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DEVELOPMENT INNOVATION VENTURES (DIV)

DIV Partnership Opportunity
Selection of winning applications is based on: Cost-Effectiveness Rigorous Testing Pathways to Scale The upcoming deadlines for DIVs grant competition are: December 16, 2013 April 15, 2014

Potential applicants are directed to go to the DIV Web site at: www.usaid.gov/div, or to send an e-mail to: DIV@usaid.gov.
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GLOBAL DEVELOPMENT ALLIANCES

WHAT ARE GLOBAL DEVELOPMENT ALLIANCES?

Business Interests

Alliance Opportunity

USAID Development Goals

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HOW ALLIANCES WORK

Corporate Partners Project

Implementing Partners Social Enterprises

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Global Development Alliance: Key Facts Over 1,000 partnerships with 3,000 distinct partners Leveraged over $9 billion in combined public and private resources On average leveraged $4 in private resources for every $1 in USG funds Diverse portfolio of partnerships spanning all regions and development priorities Broad base of partner relationships: 30+ global strategic relationships / MOUs

Selected Global Partner Relationships

Open Door to the Private Sector- The GDA Annual Program Statement - http://www.usaid.gov/gda
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DEVELOPMENT CREDIT AUTHORITY Impact of Credit Guarantees

Risk Perception

Lender

50% Guarantee on principal

Loan repayment

Borrower

Collateral Requirements
Capital Mobilized: $2.7 billion

Longer-term Financing

Default Rates: 1.75%

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USAID AND ACUMEN PARTNER FOR SOCIAL ENTERPRISES

Launched: September 2012 Purpose: $15 million in private debt capital to social enterprises USAIDs Role: USAIDs Development Credit Authority partially guarantee loans made from banks or nontraditional capital providers to social enterprises within Acumens portfolio. Goal: To reduced perceived risks in the markets to help attract growth capital for social enterprises needed to expand and reach scale.

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DEVELOPMENT GRANTS PROGRAM

Competitive small grants program Provides opportunities for local organizations that have limited or no experience managing direct USAID grants. Purpose to build the capacity of these organizations to better meet the needs of their constituents in addressing social services or economic development needs. 2013 Round Closed August 15, 2013
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KEY TAKEAWAYS
There is no one size fits all approach Tools donors provide to encourage social investing should be varied and flexible Policy environment should be:
Conducive to encourage private sector investments Supportive of the establishment and registration of various organizational structures to carry-out socioeconomically valuable programs

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Its rooted in our conviction that true development involves not only delivering aid, but also promoting economic growth broad-based inclusive growth that actually helps nations develop and lifts people out of poverty.

President Obama May 18, 2012

We are witnessing an unparalleled opportunity for innovative, large-scale private sector partnerships to achieve meaningful results in global development. USAID Administrator Rajiv Shah June 27, 2011
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PARTNERSHIP OPPORTUNITIES
http://www.usaid.gov/partnerships

USAID/Vietnam: http://vietnam.usaid.gov
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Randolph Flay Director, Office of Program Development U.S. Agency for International Development in Vietnam E-mail rflay@usaid.gov General Inquiries: Vietnam.Partnerships@usaid.gov

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