Driving social impact investments in Africa

Africa, home to some of the world's fastest-growing economies, also faces the challenge of nearly 429 million people living in extreme poverty. With a poverty threshold set at $2.15 a day, the region is in dire need of sustainable solutions to address pressing challenges such as poverty, inequality, and climate change. Impact investing has emerged as a strategic tool to drive social and environmental benefits while generating financial returns. CNBC Africa recently engaged in a discussion with Caroline Mulwa, Regional Director of OikoCredit, to delve deeper into the evolving landscape of social impact investments in Africa. OikoCredit, with a rich history of 50 years in global social impact investing and 30 years in Africa, has witnessed significant changes in the sector. The organization has observed a surge in interest towards Africa over the past decade, with various social investors establishing a presence in the region, primarily focusing on sectors such as financial inclusion, food systems and agriculture, and climate finance. Financial inclusion remains a key area for investment, as it empowers individuals, enables the growth of small businesses, and supports economic independence. Additionally, the agriculture sector in Africa, which employs over 70% of the workforce and contributes significantly to the GDP, presents immense opportunities for social impact investors. Climate finance has also gained traction, with a growing emphasis on climate mitigation and adaptation strategies to address the continent's vulnerability to climate change impacts. Sectors like health, education, and water and sanitation are also drawing interest from social impact investors, albeit to a lesser extent. Despite the progress made in social impact investments, there are challenges that hinder the scaling of such initiatives in Africa. One of the key obstacles identified by OikoCredit is the uneven expansion of financial inclusion across different African countries. While regions like East Africa and South Africa have witnessed notable growth in this area, West Africa lags behind. To adapt to this evolving landscape, OikoCredit is exploring new sectors for investment, with a particular focus on climate finance. However, breaking into this domain requires significant investment in staff training, product development, and value proposition enhancement to ensure impactful outcomes. Looking ahead, the social impact investment space in Africa holds immense promise, provided that stakeholders navigate the existing challenges effectively. By addressing the disparities in financial inclusion, exploring new sectors for investment, and enhancing capacity in emerging areas like climate finance, investors can drive sustainable change across the continent. As Caroline Mulwa aptly highlighted, social impact investments can play a crucial role in advancing the Sustainable Development Goals and fostering inclusive growth in Africa.