Voices from the Finance and Investment Network: FINCA Ventures

Seeded by FINCA International, FINCA Ventures is an early-stage impact investment fund with $3 million in assets under management. Through a catalytic contribution from USAID INVEST, the Fund seeks to raise significant external capital to focus on three pillars of investment — global health, agriculture, and water, sanitation, and hygiene (WASH). Managing Director of FINCA Ventures, Omer Imtiazuddin, discusses working in partnership with USAID and the challenges and opportunities associated with investing for impact.

By Carolanne Chanik, USAID INVEST Communications Advisor

FINCA Ventures is an impact investing initiative seeded by FINCA International. Built on more than 35 years of experience, FINCA International has created a global microfinance network that provides financial access to social enterprises that spark labor productivity among households and micro-, small- and medium-sized enterprises. FINCA International owns 20 microfinance institutions, which serve over two and a half million customers globally and has an asset base of $800 million.

FINCA Ventures, comparatively, is new — just now in its third year of implementation. The early-stage impact investing fund provides patient capital to innovative, high-impact social enterprises. The Fund is led by Managing Director Omer Imtiazuddin, who offers 20 years of experience in both commercial finance and impact investing. “Our team actively partners with entrepreneurs who create solutions that meaningfully grow incomes and provide resilience for families and small businesses,” says Imtiazuddin.

Just over a year ago, FINCA Ventures was following a “generalist” investment strategy, working with companies across sectors. Recently, however, the Fund has shifted gears. “We are now concentrating on three verticals — global health, agriculture and WASH — each with a lens towards financial inclusion,” explains Imtiazuddin. FINCA Ventures will make investments along all three verticals.

USAID’s Bureau for Resilience and Food Security (RFS) engaged INVEST to strengthen and support USAID Missions to build resilient communities and countries, enhance well-beings, and improve food and water security. Under this effort, INVEST supported FINCA Ventures in creating the agriculture and WASH umbrella fund to catalyze private sector investments aligned with USAID’s development objectives.

“USAID funding is catalytic; it enables us to both invest in more portfolio companies and build a launching pad to try and raise a $50 million agriculture and WASH fund,” says Imtiazuddin. “I think from the USAID perspective, it’s important that funding really be impact focused. And FINCA Ventures itself is very much an impact-first fund.”

The Fund will work with USAID Missions to identify agriculture and WASH investments that mobilize private sector and blended financing to achieve their development goals. The Fund’s scope is global, but FINCA Ventures will work primarily with RFS focus countries in sub-Saharan Africa.

FINCA’s umbrella fund is built with a flexible structure which allows the team to approach and work with interested USAID Missions on pipeline development. “We’ve just started, but we’ve already had calls with both the Tanzania and the Kenya Missions,” says Imtiazuddin. “So far, it’s been a very good collaboration and we’ve gotten concurrence on some of our initial investments.” The Fund will provide early-stage capital to companies operating in the agriculture and WASH sectors serving low-income customers. Seed investments will start at $200,000, and follow-on investments may be up to $3 million.

One of FINCA’s investments is in a company called Jibu, a water franchise model, working across five countries in Sub-Saharan Africa. FINCA Ventures also invested in NatureLock, which offers an innovative food preservation technology. NatureLock will partner with Unilever and the Rockefeller Foundation in piloting and scaling this model across east Africa. Catalytic contributions from USAID and INVEST enabled FINCA Ventures to invest in both those companies, however, FINCA also contributes its own investment. “We’ve brought our own funding to the table, and so essentially co-invested, which I think adds leverage to USAID’s contribution,” says Imtiazuddin.

COVID presented challenges to impact-focused investors like FINCA Ventures. “A big part of our investment strategy is ensuring that impact is actually met,” stresses Imtiazuddin. Due to travel restrictions, however, Imtiazuddin and team weren’t able to conduct the same level of monitoring and due diligence — typically involving farm, factory, and field visits. Instead, FINCA has had to rely on collaboration between other investors. “We were able to share due diligence during the COVID-19 outbreak and make sure that the company we are investing in meets both FINCA’s impact and financial requiremets. It’s certainly been challenging,” explains Imtiazuddin.

Meeting with RFS-aligned Missions has also presented some challenges. “All of these relationships are easier in person, and I think in a more normal year we would already have visited the Missions in countries like Kenya and Tanzania,” says Imtiazuddin. “We’ll be looking to do that once travel reopens and some of these lockdowns ease, but so far it’s been a great relationship working with USAID Washington and the Missions as well.”