InReturn’s focus countries – Kenya, Uganda and Tanzania – represent over 11% of the African population, a growing consumer and employee base of over 100 million people.
SMEs are a crucial driver of economic stability in Africa. They increase employment, skills, and create access to health and education by solidifying a stable business tax base and by generating income for employees. SMEs need access to both capital and management support. Unfortunately, growing businesses in Africa cannot easily access growth capital, because bank loans remain difficult to secure and are short-term. Demand is strong for private equity as an alternative source of financing, because private equity investors can provide both risk capital and management capacity building and support. InReturn Capital is well-positioned to fill that gap.
InReturn actively discusses measures and manages social and environmental returns with entrepreneurs and their companies before and during the investment. Each investee company monitors and gauges its social impact by actively managing and improving key indicators, which ultimately benefit the company’s own bottom line. The manager has linked 20% of the carried interest to realising upfront set social impact targets, listed below.
The Fund’s social impact targets include:
- 10 jobs per EUR 100.000 invested, resulting in employment creation of: 2,000 new direct jobs and 60,000 indirect jobs (with a Euro 20 million Fund)
- 20% Salary increase above inflation over the investment period
- 100% of staff enrolled in health insurance
- 100% of companies with good goverance
- 100% of companies tax, legal and environmental compliance
CEO Steven Otto on InReturn’s social impact investing:
We take a very practical and down-to-earth approach to social returns on investment. We are focused on creating jobs and ensuring that the companies in which we invest pay their employees a fair wage, so they can send their kids to school, secure health insurance and improve their lives in general. We also monitor and ensure that our companies comply with all regulations regarding human resources, labour laws, environmental regulations and tax compliance. This is no small matter: a large percentage of the SMEs in East Africa do not comply with these regulations. On top of this, we work with the entrepreneurs on agreed social targets. For example, in our second investment, we introduced a year-end bonus for all employees, health care insurance, a healthy daily lunch and financial involvement in local community projects. The social plan is an integral part of the deal. Entrepreneurs are incentivized to execute these plans, both precedent to and after disbursement. We can and will stop cooperation if the investee does not comply. Our on-the-ground experience has taught us that this is most effective way to achieve measurable results that will make a real difference in the lives of the people in East Africa
