Feb 16 2017

It’s well known that the African continent has made rapid strides in economic growth and continues to demonstrate promising avenues for investors. The continent was ranked as the world’s second-most attractive investment destination in 2013, garnering a number of traditional, angel and impact investors. East Africa has consistently been named the fastest-growing region. This growth, however, has not transformed into inclusive development and the region still sees high economic inequality in terms of income and opportunities. For instance, the average Human Development Index score of Sub-Saharan Africa is less than 0.5, signifying that the region fares poorly in terms of quality of life and specifically health, education and purchasing power.

Factors such as shifting demographics toward economic development and government initiatives to improve infrastructure are on the rise, while strong foreign investment has helped establish the region as an entrepreneurial hub. Nevertheless, geographical, infrastructural and socio-economic barriers in the region render many traditional business models unviable. Consequently, most mainstream enterprises avoid targeting low-income customers and focus on markets that are easy to reach and have the capacity to pay. Result: a large proportion of the region’s low-income population remains underserved.

The existence of both underserved markets and an enabling environment for entrepreneurship has led to a rapid growth of impact enterprises in the region. Many of these enterprises have designed game-changing innovations across sectors, enabling them to serve low-income and underserved markets while ensuring sustainable returns to investors. The impact enterprise landscape in the region is currently blooming and more than 155 impact investors operate here. More than US $9.3 billion has been disbursed by development finance institutions (DFIs) and other impact investors in the region. Moreover, the base of the pyramid-focused innovations from the region continue to draw considerable interest from development practitioners across the global south.

In 2016, Intellecap undertook a study to better understand how East African impact entrepreneurs manage to design viable business models despite the various market challenges. The insights from the study can inform inclusive development in the region and across the global south. The study classified impact enterprises across three levers based on their interaction with the BoP: access, ability and knowledge.