Seeding impact investing ecosystems in Senegal, Burkina Faso and Côte d’Ivoire
When building a local capital ecosystem, you have to go with the resources you’ve got. In Senegal, that happens to be oil.
The surge in oil prices is buoying FONSIS, the country’s billion-dollar sovereign wealth fund. The 12-year-old fund, in turn, is seeking to leverage the windfall to mobilize private capital to invest in small, job-creating businesses, part of an effort across Africa to mobilize local capital from institutional investors to build the domestic infrastructure for impact investing.
A growing network of local fund managers and other intermediaries is also seeking to tap pension funds, bond markets and other homegrown capital networks to build a more durable source of financing. FONSIS is focused on local healthcare, agriculture and other small, growing businesses that create the bulk of jobs in Senegal as in other emerging markets.
“I want to see a real value chain of impact investing and impact capacity building,” says Nanna Sylla-Coulibaly from WIC Capital, a gender-focused fund that invests in Senegal and Côte d’Ivoire. WIC began in Senegal as a women’s investing club, pulling capital and knowledge from successful businesswomen into other women-led businesses. Several years ago, WIC expanded its work with a fund backed by both local and foreign investors.
Orchestrating some of the field-building is GSG Impact, which is teaming with local fund managers to engage policy makers and other ecosystem actors and pool capital from domestic institutional capital providers to support small businesses in Africa’s smaller markets. The effort in Senegal is part of a broader effort to expand impact investing into often-overlooked markets, including Burkina Faso, Côte d’Ivoire and Zambia. GSG Impact has backing from Japan’s Ministry of Foreign Affairs for the initiative.
“It takes a whole ecosystem approach — involving investors, government, companies and civil society – to create the conditions for impact economies,” says GSG’s Impact’s Mark Kolmar. “Bringing all the actors in a country’s impact ecosystem together helps align incentives to put positive impact at the core of investment, business, government and consumption decisions.”
Market coordination
In each region, fund managers and field builders are already doing “strong work” on the ground, says Ndeye Fatou of Impact Investing Senegal, the local national advisory board, or NAB, for impact investing, part of the GSG Impact network.
After years of independent fundraising, policy advocacy work and investor education, they are now shifting “from isolated initiatives to a more coordinated market where a national partner could play a role to [get] all of these actors around the same table,” Fatou tells ImpactAlpha.
GSG Impact’s national advisory boards are one of the key organizing forces for such work, particularly in smaller markets that face a disadvantage in attracting mainstream investors. The NABs operate like industry bodies, helping bring together impact players in each market, advocate for supportive policies, and mobilize capital.
Local capital mobilization is critical at a moment when global development assistance is in retreat. It’s also viewed as a more sustainable economic growth strategy: local investors often better understand their home markets and its risks and opportunities, and are more likely to invest there for the long-term.
Other local capital ecosystem builders include the Collaborative for Frontier Finance, which has built a network of more than 100 African fund managers and capital providers. The Growth Firms Alliance, a philanthropic consortium, is also helping mobilize local institutional investors.
In Uganda, the National Social Security Fund is working to engage African pension funds in small business investing.
“Impact investing’s future is about local and regional ecosystem development,” says CFF’s Drew von Glahn. “By partnering and leveraging the skills, resources and accomplishment of local capital providers and intermediaries, the impact investing community is able to drive sustainable change, and address jobs, climate, gender inequality and other important socio-economic factors.”
Bottom up
The key is local leadership and localized design. The ambition to seed and scale impact ecosystems across Africa builds on the almost three-year effort by Ghana-based Ci-Gaba to raise capital from domestic pension funds for a fund-of-funds focused on small and mid-sized enterprises. The fund of funds reached a first close this year; its goal is to raise 70% of its targeted $75 million from Ghanaian pensions.
“The NABs need strong local leadership representing key impact pillars in the ecosystem,” Ci-Gaba’s Hamdiya Ismaila tells ImpactAlpha. “In Ghana, we built a NAB that was very encompassing and resonated with us. We also set a target of mobilizing institutional capital at scale. That is what I have been doing over the last 25 years. So it came naturally.”
GSG Impact is working with local fund managers in each region to design structures most suited to secure local capital. Taskforces in Senegal and Côte d’Ivoire are considering taking the fund of funds model. Côte d’Ivoire is considering issuing diaspora bonds to tap into the Ivorian diaspora’s financing to provide capital for local businesses. In Burkina Faso, a much smaller market with less active pensions, impact bonds may be most suited to mobilize capital.
In Zambia, NABII Zambia, the local NAB, supported the Bank of Zambia in its launch of a fund of funds for lenders, fund managers and microfinance institutions investing in small businesses. The Bank of Zambia seeded the Small Business Growth Initiative with $200 million in first-loss debt to catalyze investment from other investors.
WIC’s Sylla-Coulibaly is leading the launch of Côte d’Ivoire’s NAB to organize the country’s fragmented impact ecosystem. “We have many in the ecosystem,” she says, “but they are not [yet] working together.”
Both the fund of funds and diaspora bonds that the Ivorian taskforce are exploring represent scaled-up versions of the work WIC Capital has been doing in the country for years. Sylla-Coulibaly says there’s an opportunity for funds of funds like Ci-Gaba to tap a bigger pool of local institutional capital. She believes the appetite is there: Earlier this year, the IPS National Social Insurance Fund in Côte d’Ivoire unveiled a 100 billion West African franc ($177 million) fund to back small and growing businesses in the country.
Better policy would make it easier for such institutions to invest in small businesses, venture capital, private equity and other alternative assets. Diaspora bonds, for example, could help mobilize the more than $1 billion in remittances coming into the country each year for local investments in a more structured way.
“We need to give them something structured that can help them to commit to the country, and so the country can benefit from the diaspora,” Sylla-Coulibaly says.
Sovereign wealth
In Senegal, the expansion of FONSIS’s work is attracting the most activity from impact ecosystem builders. The sovereign wealth fund two years ago launched Oyass Capital, with the German development finance institution KfW, to address Senegal’s small business financing gap. Its first investments include Eyone Medical, a hospital information system management firm that links patients, healthcare providers, as well as insurance companies, and Dimbaya, a producer of fortified foods that is looking to expand into Gambia, Guinea and Burkina Faso.
Oyass is about two-thirds of the way to its fundraising target of 52 billion West African franc ($92 million). FONSIS also invests in local fund managers like Dakar-based Teranga Capital.
FONSIS’s portfolio of domestic investment initiatives also includes Kajom Capital, which was launched in 2022 to support homeownership through a rent-to-own model. Kajom’s goal is to develop 20,000 homes over the next decade. A FONSIS subsidiary, the Women’s Economic Empowerment Fund, supports women-led businesses like Dakar-based fruit processor Esteval and Prestiges Catering, a frozen foods supplier.
Senegal’s NAB taskforce is partnering with German development agency GIZ to build on FONSIS’s work and explore the possibility of replicating the Ci-Gaba fund of funds in Ghana.
Starting small
In Burkina Faso, the NAB taskforce sees bonds as the most promising pathway to mobilizing capital for local impact. After a military coup four years ago, the country is on a solid growth trajectory, achieving more than 5% GDP growth last year. Its ecosystem of private capital players, however, is small and fragmented, and there is little domestic institutional money to support them. Most incoming capital is from development financiers and donors.
It’s too early to consider models like a fund of funds for Burkina Faso, says Yacouba Ouedraogo, who founded the Africa Impact Investing Partnerships Center, which is part of the Burkina Faso NAB. For now, he says, “it is more about helping enterprises survive rather than working together to deliver at that scale.”
His goal as an ecosystem organizer is “to see impact mainstreamed in national policy, mainstreamed in business strategy, and mainstreamed in investment decision-making,” Ouedraogo says.
“If we’re able to do so, impact becomes a normal factor and investment will flow to those who need it.”
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