About GBF Evaluating Impact Pre-Investment Criteria Post - - PDF document

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• About GBF

Evaluating Impact Pre-Investment Criteria Post Investment Data - What indicators are tracked? Tools - How are they reported? Analysis -How does GBF review the data?

• GBF’s mission is to build and support High Impact

Businesses that provide sustainable economic

• pportunities to millions of people at the base of the

economic pyramid. GBF strives to create a world where economic

• pportunity reaches

everyone.

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• GBF provides a blend of investment capital and

capacity building to support High Impact Businesses to scale and bring sustainable economic and social

• pportunities to the base of the economic pyramid.
• GBF has invested about $2.5 million in 9 High Impact

Businesses in Asia, which make up almost one-quarter of GBF’s portfolio and have impacted the lives of almost 3.8 million people in the innovations in finance, artisanal, BoP services, and agricultural sectors.

!!

High Impact Businesses GBP GBI-I

Artisans

GBF

Shared Resources

Donors Investors

Micro Entrepreneurs Other BoP Beneficiaries

Capacity Building Debt, Equity & Quasi- Equity capital Grants Debt & Equity Capital Blended Investment Approach

Farmers

$45 to $60 million $12 to 20 million

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Total funds deployed: $2.4 million* Capacity Building Focus Areas: 1) Financial Management 2) Operations and Supply Chain Management 3) Legal and Regulatory 4) Strategy 5) Human Capacity and Governance 6) Environmental and Social

Note: The cost of staff led business assistance is not included

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• Agribusiness

34% BoP Services 27% Artisanal 23% Innovations in Finance 16% Africa 40% LAC 29% South Asia 24% Southeast Asia 7%

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$8.5 million Invested in: 10,500 Farmers 15,000 Entrepreneurs 32,000 Artisans 1,583,700 People served through cost saving activities 7,111,500 Family Members Supported

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GBF invests in businesses that generate direct and significant incremental income/savings to their suppliers or customers. GBF works with companies that directly impact in the range of 500-2000 individuals, with potential to increase and scale at least 5-10 times over the period of the investment. GBF invests in companies that either are – or motivated to be - environmentally and socially responsible. GBF uses a Social Return on Investment (SROI) to estimate the number of people its investees will reach and the social- economic impact these businesses will create.

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Step 1

• Identify the BoP beneficiaries and the type of impact created by the

business model*

Step 2

• Link the quantifiable impacts to the financial model using SROI

template

Step 3 • Project the number of beneficiaries in future years* Step 4

• Estimate the total economic returns, including terminal value in

perpetuity at a 5% discount rate

Step 5 • Estimate the total amount of external financing, including future rounds Step 6 • Calculate the SROI ratio of the social enterprise

**Assumptions are used in calculations when data does not exist

Calculating SROI

Servals is focused on providing clean, efficient, and affordable burners and stoves to consumers at the bottom of the

• pyramid. GBF is providing

Servals with a loan to expand its geographic presence in the kerosene burner market, set up a distribution channel, and launch their new Top-Lit Updraft biomass stove.

According to Servals, the Venus burners are now widely used all over India due to its design and user benefits. In fact, Servals is the single largest producer of kerosene burners in India with a market share of about 7%.

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Assumptions

• 1. Income per rural manufacturer (Rs. /yr)

9,162

• 2. Discount Rate

6%

• 3. Average fuel saving/ burner (over life)

65 Beneficiary Impact 2011 2012 2013 2014 2015 Wage Benefit to Rural Workers Incremental Income to Rural Workers 18,019 $ 21,962 $ 26,968 $ 33,309 $ 41,342 $ Commissions to Micro-entrepreneurs Payment to REEs 4,304 $ 7,372 $ 11,154 $ 15,711 $ 21,111 $

• Royalty on product

(1,442) $ (2,470) $ (3,738) $ (5,265) $ (7,074) $ Net Economic Returns 2,862 $ 4,901 $ 7,416 $ 10,446 $ 14,036 $ Net Fuel Cost Savings to Consumers Total Burner Fuel savings 1,274,400 $ 1,553,291 $ 1,907,313 $ 2,355,805 $ 2,923,953 $

• cost of burner

(855,733) $ (1,083,498) $ (1,368,617) $ (1,739,288) $ (2,221,271) $ Net Economic Returns 418,668 $ 469,793 $ 538,696 $ 616,517 $ 702,682 $ Combined Economic Returns 439,548 $ 496,657 $ 573,080 $ 660,272 $ 758,060 $ Number of beneficiaries 2011 2012 2013 2014 2015 Rural manufacturing employees 90 122 165 222 298 Micro Entrepreneurs 330 520 750 1,020 1,330 Consumers 456,443 623,249 849,248 1,150,208 1,551,600 Total 456,864 623,891 850,163 1,151,450 1,553,228 External Financing 2011 2012 2013 2014 2015 LT Debt 114,986 $ 153,025 $ 51,769 $

• $
• $

ST Debt 43,846 $ 25,787 $ 38,111 $ 55,114 $ 78,368 $ Revolver

• $
• $
• $
• $

25,857 $ Equity 159,211 $ GBF investment 98,913 $ 89,216 $ 81,250 $ Total Capital 416,955 $ 268,028 $ 171,130 $ 55,113.87 $ 104,224.32 $ Exchange Rate (USD/INR) 46.00 $ 51.00 $ 56.00 $ 61.00 $ 66.00 $

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SKEPL is based in India and provides technological solutions for better milk collection to village level cooperatives. Through its products, SKEPL generates economic impact for farmers by increasing the share of dairy production revenue that they receive, reduces the risk of lost income from wasted milk, and increases transparency into the entire process for farmers.

AKASHGANGA is currently implemented at more that 700 locations and with millions of farmers dependent on dairying as a supplementary livelihood.

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Dairy farmers who are members of dairy collection societies that use SKEPL’s managed services product SKEPL expects to serve 645,000 dairy farmers in India by 2015.

$19,314,010 $667,819 28.92

$*

Beneficiary Impact 2011 2012 2013 2014 2015 Farmers Savings from samples 200,750 $ 521,950 $ 1,003,750 $ 1,686,300 $ 2,589,675 $ Increase in annual bonus 16,432 $ 42,435 $ 81,834 $ 136,015 $ 209,761 $ Combined Economic Returns 217,182 $ 564,385 $ 1,085,584 $ 1,822,315 $ 2,799,436 $

• Payment made by co-ops for service

(210,504) $ (517,740) $ (950,892) $ (1,326,008) $ (1,712,232) $ Net Economic Returns 6,677 $ 46,645 $ 134,693 $ 496,306 $ 1,087,204 $ Number of beneficiaries 2011 2012 2013 2014 2015 Number of Co-ops (cumulative) 500 1300 2500 4200 6450 New 500 800 1200 1700 2250 Existing 500 1300 2500 4200 Farmers 50,000 130,000 250,000 420,000 645,000 Total 50,000 130,000 250,000 420,000 645,000 External Financing 2011 2012 2013 2014 2015 LT Debt ST Debt 125,245.56 $ Equity 154,608.18 $ GBF investment 221,658.77 $ 209,682.36 $ Total Capital 501,512.51 $ 209,682.36 $

• $
• $
• $

Projections 2011 2012 2013 2014 2015 Average cooperative profit 1,117.81 $ 1,110.29 $ 1,113.39 $ 1,101.51 $ 1,106.16 $ Number of AMCS Managed Services sold (cumulatiave) 500 800 2500 4200 6450 Monthly managed services fee 32.89 $ 31.11 $ 29.72 $ 28.00 $ 26.78 $ Exchange Rate (USD/INR) 45.60 $ 48.21 $ 50.48 $ 53.57 $ 56.02 $ Assumptions

• 1. Discount rate

5%

• 2. Sample milk saved per day per farmer (ml) ( SKEPL data)

20

• 3. Average price for milk/liter

$0.55

• 4. Net increase in bonus after AMCS (Ford data)

3%

• 5. Average number of members per co-op (industry research)

100

• 6. Average cooperative profit pre AMCS (Ford data)

48,550 INR

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• *

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GBF collects basic metrics, takes steps to ensure data quality, creates dashboards to visualize the important metrics, and analyzes that information in order to make improved management

• decisions. In addition, GBF

provides technical assistance to its portfolio companies to enable them to carry out the same process.

GBF is working with Jaipur Rugs to improve its financial planning and help the company become one of the largest manufacturers

• f hand-knotted carpets in India, producing handmade area rugs,

including the hand knotted, hand tufted, and flat woven styles.

GBF has contributed performance data for analysis in the first IRIS data report released by the Impact Reporting and Investment Standards (IRIS) initiative of the Global Impact Investing Network. IRIS is a common language for defining, tracking, and reporting the social, environmental, and financial performance of an organization. This equips GBF with the ability to compare financial,

• perational, social and environmental metrics

across the impact investing industry.

Data

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Financial Metrics Example: Income statement, balance sheet, and statement of cash flows. Metrics include revenues, cost of goods sold, operating expenses, and gross margin. Operational Metrics Example: Number of hectares farmed for agribusinesses or the average revenue per user (ARPU) for investments in the BoP services sector Social Metrics Example: The number of farmers, artisans, entrepreneurs or BoP consumers a company is supplying from or selling to, the net income or savings to those people, and the number of female employees and

• suppliers. It is important to note that many metrics GBF considers to be

social metrics are actually operational metrics for high impact businesses.

Data

• 1. Infrastructure

Management Information System (MIS)

• 2. Data Visualization

Management Dashboards

• 3. Information Gathering

Client Feedback surveys, Social Impact Verification, Progress Out of Poverty Surveys

One of the primary focuses of GBF’s technical assistance is to build the portfolio company’s capacity to create, maintain, and manage through the use of management dashboards

GBF’s iPAL framework uses different tools to determine businesses’ financial, social, and environmental progress over the engagement period with GBF.

Tools Tools: Social Impact Verification

The Social Impact Verification process includes a review of reported figures, raw data, and the underlying systems for data collection and management in a four-step process:

• 1. A desk review of all social impact, financial

and operational data reported to GBF and collected by the investee;

• 2. Site visit and interviews with the investee to

understand their operations and data management processes;

• 3. Site visit and interviews with suppliers or

clients to verify data regarding incremental impact;

• 4. Final data assessment and knowledge sharing

when investee is rated, and identifying areas for improvement discussed with the investee.

GBF staff visit Servals Automation Private Limited (Servals) to conduct Social Impact Verification, ensuring that several social and operational metrics are checked for quality and accuracy

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Tools: Client Feedback Surveys

Why conduct a client feedback survey? Allows for improvement of services provided Creates an open forum to share opinions and suggestions on improvements and current performance Helps ensure a partnership approach where all sides are in tune to each other Who is surveyed?

• 1. A Portfolio companies’ client base is

surveyed about the portfolio company, and 2.GBF’s Portfolio companies about GBF.

Tools: Progress Out of Poverty Surveys

What exactly is a POP survey?

• A fully customized tool of approximately 15 easy

to answer questions – including type of housing material, education level, and access to basic services

• Designed to help benchmark the socio-

economic standing of beneficiaries against available national statistics and tools (Ex. Grameen Progress out of Poverty Index, USAID PAT, MDG indicators)

• Allows GBF to demonstrate the degree to which
• ur client enterprises’ operations improve the

lives of their beneficiaries

• Helps to verify/revise assumptions used in the

SROI

49% of surveyed HAI producers are living below $1.25 per day and are considered by USAID to be in “extreme” poverty Selfina borrowers see a positive correlation in the loan size they receive and the increased profitability

• f their business

With over 5,000 surveys collected 44%

• f LabourNet (LN)

workers are seeing higher quality of work because of the LN training they received

32% of LATCO International farmers in their first year with the company are living below the absolute poverty line, and that percentage drops to 13% for farmers who have worked with LATCO for at least one season.

Tools: Survey Results

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GBF has monthly calls with each client to provide analysis and feedback on client reports. Over time, GBF’s portfolio companies improve their ability to make decisions that improve their financial sustainability and social impact. GBF maintains several dashboards used to track different aspects of its

• wn work.

GBF also uses a Social Return on Investment (SROI) calculation to estimate the number of people that its portfolio companies will reach and the quantifiable social-economic impacts these businesses will generate to those people.

Analysis

Discussion

• How can we best measure and improve labor and

environmental policies?

• How should impact investors set social impact goals?

– As an organization – By region – By sector

• Should we measure growth of value created (income

to artisans and farmers), people’s progress out of poverty, or both? Should we look at multidimensional aspects of poverty (access, wellness, etc)?

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Export-Import Bank of India Dalberg Global Development Advisors Krishi Gram Vikas Kendra (KGVK) BASIX Self Employed Women's Association (SEWA) International Finance Corporation (IFC) GBF aligns with strong, experienced partners with distinctive capabilities and skills, which can help our clients grow into catalysts for economic growth and social change. Below are some of the partners GBF has worked with in India:

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Tools: Social Impact Verification

The social impact verification methodology assesses social impact data across five criteria: 1. Compliance 2. Capability 3. Reliability 4. Integrity 5. Accuracy Using this methodology, GBF is able to determine whether or not reported figures are accurate, what the underlying operational factors are that determine data quality, immediate corrections that can be made to improve accuracy of reported figures, and opportunities to provide technical assistance to support the development of improved data management systems and processes