Grassroots Business Fund (GBF) uses mezzanine/quasi-equity investments to help potential high-impact businesses in emerging markets become more investment-ready for equity investors. GBF addresses this constraint by providing long-term investment capital that participates in company results (and behaves like equity) by providing an exit through company cash flows to address liquidity concerns of investors.
Additionally, GBF provides technical assistance grants (Business Advisory Services) to client companies that help to address internal challenges, such as the lack of financial controls, systems, or corporate governance routines mentioned above. This approach allows GBF to partner with entrepreneurs under a realistic structure that doesn't require them to give up substantial ownership, yet still has returns linked to the company's success.
To this point, the companies in GBF's portfolio have supported 1.3 million people directly, and 5.4 million after accounting for family members. Just this past year, GBF's clients generated an estimated .5 million in net economic benefits to low income communities.
In 2014, Grassroots Business Fund (GBF) will build upon this track record with a commitment to raise million in investment capital along with million in capacity-building funding to continue providing investment and business advisory services to high impact businesses providing economic opportunities to low income people in Africa, Asia, and Latin America. This will allow GBF to continue improving its methodology and track record over the course of the next few years.
GBF anticipates investing in and providing business advisory services to an additional 15 to 25 companies over the next 5 years (2015 to 2020), which will directly benefit an additional 500,000 to 1,000,000 workers, farmers, artisans, entrepreneurs or customers by creating million of economic value annually. GBF's partners will provide both the investment capital and not-for-profit funding necessary for this commitment.
Present - December 2014: Raise and close fund
January 2015 - December 2020: Source and invest in new clients, continue to report financial results, results of BAS efforts, and social impact.
For-profit companies that are founded and managed with a specific social mission in mind, providing sustainable economic opportunities and basic affordable services to people with low incomes, are often limited to short-term, highly collateralized lending, which puts significant pressure on their cash flows. Local banks and international development agencies often lack the flexibility and resources to provide this type of capital. (US National Advisory Board on Impact Investing, 'Private Capital Public Good,' 2014).
At the same time, these potentially high-impact businesses lack the financial controls, systems, and corporate governance routines that they need to attract equity, and other impact, investors. Without long-term, risk-sharing capital and quality, affordable, technical assistance, these high-impact businesses are constrained in adding value, growing, and fulfilling the potential for sustainable impact for their supply chain and customers.
GBF seeks investment capital and capacity-building funding to complete the commitment. Additionally, GBF is always seeking partners to facilitate localized capacity-building and technical assistance for clients.
GBF strives to be a model in the field of impact investing, and is more than willing to share best practice information with partners in the field.