Proposed Inclusive Business Financing Facility

This technical assistance project will explore the opportunity for ADB to set up various investment funds for inclusive business. The investment funds may be sourced by ADB in a 25% ratio with an ADB investment of $10 to $20 million per fund. In addition, traditional financing instruments such as depth, guarantee, mezzanine finance and financing facilities will be explored. The investment strategy, deal size, expected returns and fund design will be determined based on the results of each country feasibility study and further due diligence done by ADB's inclusive business fund expert.

The first inclusive business financing facility was proposed by the consultants for the Mekong region (Cambodia, Lao PDR, Thailand and Viet Nam). Recent discussions suggest to broaden this fund into a Southeast Asia Inclusive Business Funding Facility that would include Indonesia, Myanmar, and the Philippines. The feature of the fund is summarized in the table below and elaborated in the attached fund paper.

Another funding facility was proposed by the consultants to cover India and Sri Lanka. That would mainly invest 1-10 million per deal in debt and could supplement equity investments in IBs by existing funds. The India and Sri Lanka study, as well as the additional study on "debt financing opportunities for inclusive business in India and Sri Lanka" provides further details.

Both funds are proposed to be supported by a larger technical assistance facility that provides pre- and post-investment advisory services to companies, helps with impact assessments, facilitates studies on the enabling environment, and promotes further knowledge exchange.

However, both sub-regional proposed IB funds would need further work by ADB before a final decision on the actual investment would be taken.

Total investment size $60-$100 million
Duration 10 years. 4+1+1 years investment period.
Deal size 15-20 deals in the amount of $0.5 to $10 million each
Targetted Return of the fund 10-12% net
Institutional arrangement The fund would be managed by a professional fund manager, and ADB is identifying the fund manager by 2013.
Investment strategy The fund would have a thematic (poverty impact) rather than a sector focus; it would engage the poor as
  1. consumers of public goods (e.g. transport, health services and insurance, renewable energy) but not of private goods (food consumption),
  2. suppliers (mainly value chain agriculture with favorable contracting arrangements, including fair trade),
  3. laborers (promoting decent work), and
  4. distributors (generating income and value).

More information on the funding criteria and other inclusive business investment funds will be posted later.