Q: Why is Oxfam through Triple I active in impact investing?
A: Oxfam believes the upcoming SME sector in developing countries has the potential to contribute in a positive way to social change and can therefore help Oxfam realise its mission: a just world without poverty. Access to capital (investments) is one of the key determinants to enable SME development in developing countries.
Q: What is Oxfam doing in the Impact Investing space?
A: Oxfam is a confederation of 17 different Oxfam affiliates of which Oxfam America, Oxfam Great Britain, Oxfam Novib (Netherlands) and Intermon Oxfam (Spain) have initiated impact investing and SME development activities. The different affiliates together offer finance and business development services to SMEs in around 25 countries and coordinate their efforts and share lessons learned in an Oxfam wide community of practice. Next to building a strong portfolio of SMEs, Oxfam is developing its knowledge and experience in impact measurement and aims to contribute to a more enabling policy environment for SME development through its lobby activities at national and international level.
Q: What is Triple I?
A: Triple I is the abbreviation of the legal entity Inclusive Impact Investments BV. This company was initially founded by Oxfam Novib on 7 October 2014 and since December 2016 Lime Tree Impact Investments entered as a new majority partner. Today Lime Tree holds 60% and Oxfam Novib 40%.
Q: What is the Triple I fund specifically about?
A: The fund intends to support entrepreneurs committed to achieve social impact while making financial returns in Africa and Asia. The fund aims to cover the full spectrum of the so called ‘missing middle’ by dividing the SMEs in this spectrum in three categories (small, early growth and expansion) who are all serviced with finance and business development services tailored to their specific needs. The fund invests directly, through co-investments and through financial intermediaries.
Q: Does the fund focus on specific sectors, regions?
A: The fund invests in Africa and Asia primarily. The investments are focussed in the countries Nigeria, Uganda and Vietnam. It will focus the majority of its investments in the agricultural sector (primarily in agro processing) and consumer products that have a positive effect on the lives of women, youth and small farmers living in poverty. To ensure sustainability the fund invests preferably in local entrepreneurs.
Q: How much money does Oxfam Novib put in the fund?
A: In total Oxfam Novib invested € 1 million in Triple I. Lime Tree committed itself to invest up to € 1 million. The fund size is currently € 2 million.
Q: Where does this money come from?
A: Oxfam Novib has freed up the € 1 million from its own reserves. The money received from private donors is not used for these investment activities.
Q: How does Triple I relate to Oxfam’s other Impact Investing activities (e.g. micro finance)?
A: Oxfam Novib has almost 20 years of experience in Micro Finance and considers this as an important track record to build on in its current entry into the SME finance market. It will use its partnership with Triple Jump, local micro finance institutions and knowledge of realising impact through investments to support effective investments in SMEs. Other Oxfam affiliates (Oxfam Great Britain and Oxfam America) have also built up a track record in SME development and investing over the years with the WISE (Women in Small Enterprises), EDP (Enterprise Development Programme) and the Small Enterprise Impact Investing Fund (SEIIF). An Oxfam team at global level coordinates these activities so that both investors and SME will be offered the right support from the various funds that Oxfam operates. Oxfam is active in over 20 countries in the SME finance space. Investing in SMEs in these countries is part of Oxfam’s country strategy and programme to improve the livelihoods of women and men living in poverty.
Q: Are there any other partnerships involved?
A: Triple I will actively seek partnerships with other local funds, co-investors, business incubation and development organisations and specialists in impact measurement to ensure the highest possible quality and sustainability of its efforts.
Q: Is Impact Investing going to replace Oxfam’s grant-based work?
A: Oxfam will remain an organisation with many mandates and is a worldwide influencing network lobbying and campaigning for a more just world without poverty. Oxfam will remain active in the humanitarian space and believe there are many activities that need structural developmental aid. The Impact Investing work is an enrichment of the private sector work and is additional to other work. Oxfam will strive to make it complementary by ensuring that our different interventions strengthen each other as much as possible.
Q: How important is the social impact of its investments for Triple I, also compared to financial returns?
A: Triple I is an impact first investor, but a (expected) financial return on its investments is a condition to assure social impact on the long term. Being an impact first investor, Triple I will strongly focus on supporting the entrepreneur to be specific about the social impact he or she expects its business to generate and will monitor this impact regularly.
Q: How does Triple I define social impact?
A: Triple I expects its investments to have a positive impact on the lives of small farmers, women and youth living in poverty. The SMEs in which Triple I invests provide direct employment to farmers, women or youth living in poverty, and/or lead to income increases through an improved position in the supply chain of small farmers, women or youth and/or offer services or products to farmers, women or youth that improve their lives or that of their families.
Q: How does Triple I monitor and measure impact?
A: Triple I has developed its metrics system based on international impact investing frameworks (GRIIS/IRIS) and its own rights-based approach to development. In setting the terms of the investment, a limited set of smart impact monitoring criteria are developed in close collaboration with the entrepreneur and taken up in the contract. Triple I can and will support the entrepreneur if needed with training and support to strengthen his or her impact analysis. In close cooperation with Oxfam Triple I will do periodic (every three – five years) impact evaluations of its specific investments and overall portfolio. Oxfam has built up some relevant experience in executing impact studies in its grants and microfinance portfolio that provide an important reference point for these evaluations.
Q: How does Triple I manage the risks related to investments in SMEs in Africa and Asia?
A: Triple I is diversifying its portfolio to manage risk. Although it focuses on SMEs that have most difficulty getting access to finance (the true missing middle), it deliberately balances out the risks of these investments with investments through financial intermediaries and investments in more established companies. Triple I also invests strongly in partnerships and local staff expertise to manage the risks of its investments. However, Triple I is aware of the high risk associated with investments in the missing middle, and sees it as its front runner role to deliberately take these risks. The expected social returns are the upside to the risks taken.
Q: What are the main criteria Triple I uses in the selection of its investments?
A: Triple I works with local entrepreneurs, who have invested their own resources in their business. Young entrepreneurs who have run their business for a few years and entrepreneurs with a track record that want to start a new business are both welcome. Triple I looks for entrepreneurs with a social heart who are in need of an investment partner who offers more than finance and wants to truly engage with them to grow their business and improve the lives of people living in poverty at the same time. For more insight in Triple I’s criteria see section Criteria on this website.
Q: What does the Fund not do?
A: The Fund does not invests in cooperatives, farmer groups, sacco’s (savings, credit, cooperative organisation), NGO’s, private persons, listed companies and foundations. The fund does not invest in companies active in real estate, project finance (housing, water irrigation, power plants), leisure (hotels, restaurants, travel agencies), private schools and private health clinics. Triple I does have an exclusion list.
Q: What is the average size of a loan or equity investment?
A: Triple I provides finance in the range from Eur 100.000 to Eur 500.000. Its average direct investment size is expected to be around Eur 300.000.
Q: What are the terms of investments Triple I offers entrepreneurs?
A: Triple I offers flexible finance, determined on a case by case basis geared at growing the business of the entrepreneur. Triple I provides both debt and equity (including: mezzanine, subordinated debt and profit related structures). Triple I needs to balance the liquidity of its portfolio but is not in there for the quick gain. The maturity of the loan/investment will be tailor made and can run up to 8 years (depending on assets to be financed and projected cash flows). A grace period is acceptable in case of postponed cash flow projections. Triple I offers market conform interest rates on the loans it provides. Loans to local SME will be offered in local currency (if possible). If a company’s income is predominantly in USD (export), financing will also be in USD. The investments do not always require collateral (depending on the SME characteristics and local context, in some cases collateral will not be asked in order to catalyse local working capital finance).
Q: Does the Fund submit convertible grants?
A: No, the Fund is only active as an Impact Investor and does not have resources available to submit soft money.
Q: How long does Triple I generally take for the due diligence on potential investments?
A: The due diligence process takes on average 4-8 months from first contact to signing the contract.
Q: How does the process go and who finally decides on future investments?
A: An SME interested to work with Triple I can approach the country offices or head office. Business advisors in specific countries will also actively look out for SMEs that could potentially benefit from Triple I’s services. There is a short intake phase (with a quick scan) done by our local business expert, followed by a more thorough due diligence process lead by our fund manager based in The Hague, the Netherlands. Finally, the investment proposal is submitted for external advice to our investment committee.
Q: Is Triple I interested in co-investing, if yes under which conditions?
A: Triple I is interested in co-investing with other like-minded investors. It sees great opportunities in the complementarily that co-investing efforts can offer. Triple I considers that it can contribute its local presence for monitoring purposes and knowledge of social impact measurement while benefiting from the experience of others in specific market knowledge and financial expertise.
Q: Is Triple I actively fundraising to attract other investors to its funds?
A: Triple I is currently not actively fundraising for its Impact Investing work yet, but is exploring potential partnerships for the future. Any investor interested to work with Triple I on its impact investing activities is very much invited to approach us.
Q: Does Triple I intent to make profit with its investments?
A: Triple I expects its investment activities to provide a modest return in order to cover costs and attract investors in the future that feel at home with Triple I’s impact first and financial sustainability profile. If returns are more than needed for cost recovery and returns to investors they will be re-invested in the fund.
Q: What is the interest rate Triple I charge on the loans it provides?
A: Oxfam charges market-based interest rates to enable the SME to access finance in its local market in the future. Triple I is open to offer other flexible terms to enable the entrepreneur to grow its business in a sustainable way.
Q; What makes Triple I a different investor from banks or other investors?
A: Triple I truly wants to engage in a partnership with the entrepreneur, supporting him or her to grow the business and deliver on the social and financial impact agreed. It is in Triple I’s interest to be there for the long run, provide more than only capital and be open and flexible to act in the interest of the entrepreneur and his business. Triple I intends to offer more than money.
More than money
Q: What other services Triple I provides than access to capital to entrepreneurs?
A: Triple I offers venture assistance services. The services range from support in business planning to facilitating market research, business governance advice or linking SMEs to specific technical expertise. Triple I has built and continues to build a network of expertise organisations that it can refer the SME to. It has limited finance available to support SME’s to access the services of these organisations. Furthermore, the Oxfam brand name has a positive sound and does not refer to the negative experiences of entrepreneurs with other providers of money.