The United Nations has established a multipartner fund that will invest in social enterprises, which have the potential to scale up within the “global south,” Devex has learned.
Considered a pioneering fund, the U.N. Social Enterprise Facility for the South will pool official development assistance and equity funds and initially support social enterprises in Asia and the Pacific.
“There's nothing like it in the U.N. at all; if I look around the landscape, there's nothing like this anywhere,” J. David Galipeau, proponent and manager of UNSEF as well as a knowledge and innovation team leader based at the Asia-Pacific Regional Center of the U.N. Development Program, told Devex.
Along with UNDP, the U.N. Environment Program and U.N. Population Fund have signed memorandums of agreement to partner for the facility. According to Galipeau, UNSEF has attracted interest from commercial banks, venture philanthropists and hedge fund managers specializing in socially responsible investment funds.
The fund is specifically looking to support “high-potential” social enterprises — which can be small social business or nongovernmental organizations “that are actually social businesses, they just don't know it yet” — that can export their development impact in a south-south fashion. UNSEF will prioritize social businesses working to improve basic service delivery as well as to promote inclusiveness, innovation, environmental sustainability, the use of renewable energy and natural disaster risk reduction.
Galipeau expects the facility to be formally launched in January 2015 and have initial capitalization of $5 million to $10 million per year. For its initial phase, UNSEF is looking to support four or five social enterprises, each of which is slated to receive $1 million to $2 million in financing.
Although the funding represents a one-off grant, Galipeau hopes that once the social enterprise becomes self-sustainable, it will draw more private investment.
To ensure that, Galipeau said his team will work with the social enterprise — which will be selected through a competitive application process — on a plan to help them have what they need to grow their business and particularly to expand in other Asia-Pacific countries or beyond in the “global south.” During the duration of UNSEF’s nine-to-12-month support, the social enterprise will receive mentoring, technical expertise, investment advice and funds for additional assets, all of which will be paid for by the investment.
The design will include an indicator when the organization can graduate from UNSEF support. The graduation target could be self-profitability, buyout or an initial public offering.
“We’re concerned about self-sustainability, that after the incubation, [the selected social enterprises] are not left hanging, that they have a business partner that we've arranged for them and they have someone to hold their hand and go further and beyond,” Galipeau said.