Andia Chakava is an Investment Director at the Graça Machel Trust and a global thought leader in gender lens investing
Graça Machel Trust is a Pan-African advocacy organisation focused on child health and nutrition, education, women’s economic and financial empowerment, leadership and good governance. Over the last nine years, the Trust has worked to “Multiply the Faces and Amplify the Voices” of African women and children. The Graça Machel Trust acts as a catalyst, working across the continent to advocate for the protection of children’s rights and dignity and amplify women’s movements by harnessing and promoting their contributions to the economic, social and political development of Africa.
How does your investment team integrate impact goals into your due diligence process?
We integrate impact goals into our due diligence process from the beginning of the investment process. From the pipeline building and deal sourcing stage, we are attracting, selecting and reviewing companies that are already generating impact, have a high potential for impact or have founders that are committed to creating and elevating impact.
Our due diligence starts at the screening process which is three-tier: starting out in the selection process which prefers founders that have undergone some kind of investor readiness program to strengthen financial literacy and demonstrate traction and commitment.
Second is our invitation to them to fill out our evaluation form which asks questions that touch on impact objectives that matters to us most such as having: deliberate gender equality and balance in the composition of the staff and leadership complement, specific product and services offered catering to underserved female segments, demonstrate inclusion of youth with a bias on young women and integrating the informal and rural economy either directly and indirectly through supply chains with tangible and measurable impact on improved incomes and livelihoods. We are currently in the process of integrating climate goals recognizing the intersectionality and central role gender plays in realizing this whilst aligning to our target sustainable development goals SDG 5 Gender Equality, SDG 8 Decent Work and Economic Growth, SDG 10 Reduced Inequalities and SDG 13 Climate Action.
Once the first level (negative) screening demonstrates that the businesses are worth unpacking due to alignment to our investment strategy, we further screen it with more opportunistic rigour understanding the commercial viability, and scalability and to identify the focus impact levers. This includes the ones that already exist and the ones that can be accelerated and enhanced with investment. We then engage further with the entrepreneur for more information and clarification.
During due diligence, we seek to confirm information on impact gathered so far as well as assess, collaboratively with the entrepreneur, the potential impact risks for mitigation and impact opportunities we can leverage and maximise during the portfolio management stage. It is here we are able to establish the entrepreneur compatibility, willingness, attitude and ability to drive growth embedded with impact goals so we can mutually agree on gaps, anticipated traction and outcomes over a targeted period including course corrective measures when the need arises.
We have found that entrepreneurs that we often work with are committed to the impact they make on the community and embrace the opportunity to widen and deepen their impact through innovative solutions that uplift and empower the marginalized.
Ultimately the decision to invest will rest with our investment committee after we have tabled investment recommendations that demonstrate not only the attractive return profile but the impact potential and additionality supported by our ability to align incentives and provide technical assistance support to achieve value creation.
How does innovative finance help you maximize impact?
Innovative finance has helped us widen the net to include entrepreneurs that may not necessarily qualify for finance using traditional instruments. We are deliberately focused on financial structures that cater towards entrepreneurs with limited access to collateral, are in early growth stages, and participate in sectors that may be perceived as unpredictable whilst avoiding predatory terms.
We also consider and include less sexy industries such as retail and trade sectors where many women operate whilst recognizing the unique and growing opportunities available to women in male-dominated sectors such as technology, manufacturing and energy. We are also deliberate about influencing the power dynamics of women in the agricultural and health sectors. Thus, we need to be open to various financial structures based on the stage, sector and return profile of the business.
It is not clear cut and is not a one size fits all approach when we would apply a revenue-based, royalty based or impact-linked instrument but would align terms based on the growth potential, forecasts and traction.
Our mitigation strategy is to apply a milestone-based approach as we deploy funds before we double down in order to understand the nature of the business better and the external environment within which it operates. We will also be rewarding qualifying entrepreneurs who exceed our return thresholds and demonstrate exceptional impact with technical assistance to grow further when their eligibility for a second round of financing is secured.
So being able to achieve greater impact, say, reach a large number of young and informal women through the businesses we support to ensure increased incomes across value chains makes us willing to be more flexible on terms without compromising on return profiles. Factors such as lengthening grace periods before the first repayment, allowing bullet payments periodically, supporting LPO and supply chain financing for businesses that have large orders or providing patient and growth capital to innovative and promising businesses allow many early growth-stage businesses to breathe and flourish.
How do the AVPA Deal Share Platform and Deal Share Live support your work?
It supports our work by providing access to investors that are part of the AVPA Deal Share Platform. It allows us, being emerging managers, to deploy the funds as we receive them thus boosting our track record and enabling us to meet the growing capital needs of entrepreneurs by inviting other investors to co-invest alongside us.
The platform also increases the visibility of gender lens investment deals showcasing them to the market and building more evidence for the field. In April 2022, we had the opportunity to co–host an investor showcase with AVPA which attracted 15 angels from a Nairobi-based angel network, NAIBAN, who were interested in investing with a gender lens.
Four East Africa-based tech-enabled businesses pitched their offering during the event, showcasing different technology-driven solutions in transport, e-commerce, financial services and education. Our entrepreneurs benefited from valuable feedback from the investors to strengthen their offering in relation to demonstrating clarity around ownership structures and operating models, articulating their unique value proposition and business competitiveness, showing a clear route to market for regional expansions, clear risk mitigation incorporated within business models, especially for financial services solutions.
As the promoters of our pipeline, we learned from the experience to align expectations with an investment category such as Angel investors that we are not often exposed to.
We look forward to collaborating further to continue to offer entrepreneurs in our community access to meet different categories of investors who are keen on making an impact whilst earning returns through the AVPA deal share platform.
