A Smart Path for Social Investing

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Oct 2009
West Sussex, United Kingdom, October, 07 2009 - The global financial meltdown has put a damper on hopes that private capital would soon become a major factor in financing micro-credit and other economic development programs. But the idea of putting capital to work on behalf of social progress still has more than a faint heartbeat. The most recent example is a deal put together by VillageReach, a Seattle-based non-profit that improves the performance of public health systems in developing countries, and Oasis Fund, a Luxembourg-based private equity firm that invests in social enterprises.

But the idea of putting capital to work on behalf of social progress still has more than a faint heartbeat. The most recent example is a deal put together by VillageReach, a Seattle-based non-profit that improves the performance of public health systems in developing countries, and Oasis Fund, a Luxembourg-based private equity firm that invests in social enterprises.

VillageReach provides the logistics, energy, communications, and transportation infrastructure necessary for public health systems to deliver their services in rough places in Sub-Saharan Africa and India. In 2002 it created a for-profit business, VidaGas, to provide propane to power refrigerators and sterilize medical equipment at remote clinics in Mozambique. There are no commercial propane distributors in the region, so VillageReach had to do something to bridge the gap. Its innovation was creating a for-profit company to deal with the dilemma. “We’re one of the few non-profits to develop for-profit businesses to help sustain the impact of our non-profit work,” says John Beale, director of strategic development for VillageReach.

In northern Mozambique, as in much of Sub-Saharan Africa, most people and businesses rely on charcoal and wood for basic cooking and lighting. So the folks at VidaGas saw the opportunity to broaden their reach beyond hospitals and clinics. It’s now selling to hotels, restaurants, and other small businesses. That move made it possible for the company to become profitable.

Enter Oasis Fund. VidaGas needed capital so it could expand its business more rapidly, so it sought money from unusual sources. Oasis Fund’s founder, Jean-Philippe de Schrevel, was a major investor in micro-credit through his BlueOrchard Finance, and his now branching out to invest in other economy-building projects. Oasis has raised $30 million in two years, mostly from wealthy Europeans, and has invested $1.375 million in VidaGas. “We invest globally in enterprises like VidaGas that have a direct impact on low-income markets,” says Keely Stevenson, an investment executive at Bamboo Finance, the advisory firm for Oasis Fund. “We look for exciting social enterprise models that can create great value for their clients, and can also help us grow more philanthropic capital. We’re a partner in social innovation.”

This is a great win, win, win, win situation. VidaGas helps support VillageReach’s work. It improves the public health system. Shifting from burning wood to burning propane is better for the environment. And, if the VidaGas investment pays off for Oasis, it will have more capital to invest in other social ventures.

For VillageReach, this could be the beginning of a major new strategy. It plans on establishing for-profit companies in other counties to fill in gaps in the economic fabric of communities and make real progress possible.

Who knew propane tanks could be so sexy?



Source : BusinessWeek
 

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