The Acumen Fund is a nonprofit investment fund inventing a new approach to poverty reduction: patient capital. Acumen makes financial investments in businesses in East Africa, India and Pakistan that provide goods and services to the poor. Investments, not gifts.
Acumen’s 5-7 year equity or debt investments reach local poor populations that are under-served by existing markets and enterprises. Their long-term investments give companies and entrepreneurs time to evolve and adapt. When they invest, “[their] aim is not profit maximization, but profitability” – balancing social and financial returns on investment.
Acumen invests in scalable business models to unleash businesses that have the capacity to make broad social impact. For example, here’s a description of one investment they made in Kenya:
Acumen Fund invested $250,000 in Jamii Bora to build Kaputei, an affordable housing development outside of Nairobi. Jamii Bora has since repaid this loan, and Kaputei has 750 fully constructed homes for low-income slum dwellers who had proven their ability to repay but would never qualify for a traditional bank mortgage.
Since 2002, Acumen has invested more than $50M in companies that employ more than 35,000 people. To date, they’ve been repaid $4.1M and attracted more than $140M in “follow-on” investment from other funds and organizations following their lead into profitable investments in the developing world.
Does it work?
There are two metrics for measuring Acumen’s success: 1) Are they profitable?; and 2) Are they generating social returns on investment in addition to financial returns?
On the first point, while Acumen is a nonprofit organization, their long-term approach, including both debt and equity investments, means that it’s too early to say if they will be successful in generating profits from their investments. To date they have been repaid almost 10% of their total investment outlay, and many of their equity investments may prove profitable in the long term.
On the second point, I’m on the lookout for professional evaluations of the impact of their investments, but by their own account, yes. Acumen has created thousands of jobs. The companies they invest in have reached millions of people with affordable housing, accessible electricity, clean water and health and agricultural services.
They’re also bringing their connections to global marketplaces and other sources of investment. Acumen’s track record of seeding further investment from other funds and sources demonstrates that their investment is a trusted mark of approval for other potential investors.
Finally, Acumen is contributing to the social enterprise sector in other ways, by managing a fellowship program and inventing new ways to measure the performance of impact investing. In partnership with Google, Acumen developed Pulse, a real-time social investment tracking tool that measures not only financial data but social data. Tools like this make it easier for social entrepreneurs and investors to understand their progress and demonstrate their success.
Why It Matters
Acumen is doing something new – they aren’t giving things away. They are creating functioning equity markets that support businesses, jobs, experienced entrepreneurs and services & goods that reach the poor.
When their investments are successful and Acumen is repaid (as in the example above), Acumen is at its best. They’ve accomplished their goal of creating financial returns by recycling their capital and created social returns by increasing affordable housing in Kenya.
Acumen unleashes the latent power of local entrepreneurs, who have both ideas and the ability to execute. Their work supports the connects capable entrepreneurs to the capital they need to get started, creating a group of local businesspeople with experience building businesses, seeking investors and delivering products and services.
Finally, Acumen’s investment approach breeds respect. They respect the capacity of local entrepreneurs to develop their own goods and services and they respect the capacity of the poor to become consumers.