Impact Investing –If Investors want to change something
An increasing number of investors want to achieve goals beyond criteria of profits, liquidity and risk. In a nutshell, their investments shall add to changing the world for the positive. The result is often called social return; it has nothing to do with money and interest.
Several kinds of investment can be distinguished. There is a gradual flow between purely commercial investments on the one hand and donations on the other hand. Regarding the expected rate of return, without considering the factors of liquidity and risk, the following types of investors can be found at the turning points:
- Profit oriented investors are aiming at maximum profit and disregard any social return.
- Philanthropic investors want to maximize the social return. They give, or rather donate, money into projects without awaiting interest or even a return ontheir principal.
Impact investors can be foundbetween those turning points. They don't focus on maximum profit, but they want to achieve a positive return. In order to allow a considerable social return they accept a lower than average return on investment.
The approach of Trans Africa Invest
We are following an approach that should be very interesting for impact investors. We prefer projects with a business model that likewise meets economic, social and environmental criteria. As profit margins of many businesses in Africa are generally higher of those in Western economies, our projects should be able to offer both an above average return on equity as well as a note worthy social return.
However, it is important for us to draw the line at projects that are purely dedicated to so-called social investors. Project owners anticipate the investors not demanding any profit, thereby accepting zero interest on invested capital, and renunciation of any capital gains. We do not support such projects.