Oxfam Novib and Goodwell Investments have announced the establishment of a new EUR 20 million fund to support early-stage growth companies in East Africa.
The Pepea fund aims to fill the “missing middle” by investing in businesses that are still struggling to secure financing from banks and investment funds in order to accelerate growth. Aimed at small and medium-sized enterprises (SMEs) with high impact potential, the fund will help young businesses ‘take off’ and ‘flourish’ while contributing to a greener, fairer, and more inclusive society.
Oxfam Novib and Goodwell have both long supported impact-driven SMEs. The two organizations are now collaborating to leverage each other’s strengths in an initiative that is one of the few times an NGO and an impact investing firm have collaborated on an investment program for SMEs.
Oxfam Novib has been actively investing in impact for nearly 30 years, and their first investment fund was launched in 1996. Through their Impact SME Development (iSME) Programme, the organization has been improving SME access to finance since 2015. They are advancing this mission with Pepea by making EUR 20 million available for investment in Kenya, Uganda, and Ethiopia, allowing growing businesses to maximize their positive impact in their community and the wider region.
“Oxfam Novib played a sterling role in developing the microfinance sector as a means of providing access to financial services where they were most needed,” says Tamara Campero, Investment manager at Oxfam Novib. We are ready to shift our focus away from NGOs and toward a less-served segment of the market now that that sector has matured. We recognize the difficulties that SMEs in the region (particularly those owned by women) face in obtaining tailored patient capital, and we now want to play a role in meeting those needs.”
Oxfam Novib’s natural partner in this endeavor is Goodwell Investments, which will manage Pepea’s day-to-day operations. Goodwell will support the fund’s success and portfolio development with experienced local investment managers, the possibility of follow-on investments from other Goodwell funds, and, most importantly, a shared mission to create positive impact. Both Oxfam Novib and Goodwell are actively involved in charting and monitoring the fund’s strategic direction.
This new fund will primarily focus on the sectors of sustainable agriculture, energy, clean mobility and logistics, and waste management. These industries manufacture many of the basic goods and services that account for a large portion of household spending in low-income communities. Pepea is targeting SMEs that drive the growth of a greener, fairer, and more gender inclusive ‘human economy’ that serves the needs of society while respecting the planet to improve the quality and affordability of these essentials.
The fund’s investment strategy is guided by concrete impact targets such as increasing the participation of female stakeholders across the value chain, creating new jobs, reducing greenhouse gas emissions, and providing fairer wages. Pepea will also contribute directly to the UN’s Sustainable Development Goals for climate action and gender equality, as well as indirectly to many others.
In addition to their own impact and ESG reporting, the fund is taking unprecedented steps to collect impact feedback from the target audience through a “sounding board.” It will ensure that Pepea’s fund managers take the voice of the community into account to improve impact performance and better identify unmet needs. It will be made up of representatives from SMEs as well as their end users.
The fund’s emphasis on inclusion also makes it an ideal conduit for both Oxfam Novib and Goodwell’s gender-lens investing strategies. In recent years, it has become clear how vital female entrepreneurs are to the African economy: one in every four businesses on the continent is founded by a woman. Nonetheless, they frequently face greater difficulties in obtaining financing.
Pepea provides an exciting opportunity for women working in impact SMEs to take concrete action on gender equality. The investment instruments were specifically designed to better encompass the needs of female entrepreneurs and stakeholders by utilizing innovative venture debt structures, with a focus on mezzanine finance.
“Goodwell is always looking for innovative ways to better serve the needs of SMEs, and we’re extremely pleased to have the opportunity to do so with one of the most professional, critical NGOs in the impact sector,” said Els Boerhof, Managing Partner at Goodwell Investments. There are numerous synergies between our organizations, and I am confident that by working together, we can raise the bar in the impact investing space.”
Pepea officially launched on March 30 in Nairobi, bringing together the Oxfam Novib and Goodwell Investment teams, as well as contacts from their East African network. During the event, representatives from both companies took the stage to discuss the fund’s history and goals.