Impact investing: venture capitalism for the social good
Nakibul Hoq

‘We thought it would be a much better use of our time if we could put a platform together. So we identified a whole range of businesses, and connected them to a whole range of investors’

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    Photo- Bigstock

A capitalist haven, Bangladesh has in the last decade been globally touted as a new center of social enterprise and business for the social good. While organisations like Grameen Bank have taken the lead behind this image, there is no doubt that this has been made possible only through investing in the world’s poorest of people and their initiatives, which has led to an aggressive poverty reduction mechanism.

A few weeks back I had the opportunity to speak to Jerry Nicholson, Founder and Managing Director of TinderCapital, an impact investment firm providing SMEs in Bangladesh with financial and technical resources. A British chartered accountant, Nicholson and his wife decided to set up TinderCapital in Bangladesh four and a half years back. Through TinderCapital, the founders want to take micro-finance to the next level at an unprecedented scale, and in the process seek to discover how the process will lead to the sustainability of future generations.

Impact investing is still a relatively new term in today’s Bangladesh. As businesses seek external capital from both individuals and financial institutions, rural entrepreneurs often find that they cannot have easy access to resources without sufficient security. This is where impact investors like TinderCapital come in. They target those businesses that have the highest growth potentials and work with them to make these businesses sustainable and profitable in the long run. They not only invest their financial resources but also their technical expertise, and often bring in new processes of working in the supply chain. 

At the moment there is only a handful of impact investors operating in Bangladesh, such as Incluvest, a Dutch impact investor focused on the agriculture sector. TinderCapital’s first direct investment went into Oasis Coffins, a local manufacturer of Eco-friendly coffins that are sold in the UK and several other global locations today.

When TinderCapital came in, the coffin-maker company was in an extremely bad shape. Mr Nicholson and his team worked intensely with Oasis for almost two years, and finally when the company saw the light of profit and sustenance, the investors stepped back with minor stakes in the business process. 

After the success of Oasis Coffins, TinderCapital was eager to venture into new waters. According to Nicholson: “We thought it would be a much better use of our time if we could put a platform together. So we identified a whole range of businesses, and connected them to a whole range of investors.” This idea led to the formation of the Open Accelerator.

Beginning in February 2014, Open Accelerator is a low-cost, yearlong programme through which the firm is bridging gaps between investors and rural businesses which have extremely high growth potentials.

The accelerator has brought in both international and local investors, namely BRAC Bank, DBBL and Midas Financing among the local financing companies and Incluvest among the internationals. The purpose of this platform has been to prepare businesses for long-term external investments and to identify areas where rural entrepreneurs can invest in, in order to achieve high growths and expansions of their facilities.

Needless to say, micro-finance has always been perceived to be usable only in small scales and at household levels. But impact investment firms like TinderCapital are now here to change that. They want to invest their financial resources and knowledge capital into rural businesses so that these businesses can grow into big businesses with a global reach. And while the future remains uncertain, today’s young entrepreneurs and investors might consider vesting their ideas and expertise in this sector.

In the upcoming few years, as social good becomes a leading force in the Bangladeshi business world of tomorrow, more impact investors are expected to fund the growth of smaller scale businesses at the rural levels so that these businesses can increase in scale and reach. With the right kind of expertise and targeting, the future definitely looks bright for them. 

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