AAA has said that the new report from the BBC concludes that impact investing is a useful means of helping more of the world's poor work their way out of poverty and into the middle classes. Impact investing does this by providing small businesses and social enterprises with the financial strength they need to expand and employ more people in developing countries.
Many such businesses find it difficult to secure bank loans or other traditional routes of finance. However, impact investment funds, which are sometimes run by some of the world’s most influential and wealthy people, can provide a lifeline.
The BBC report used the example of a businessman called Virender Kumar who runs a small business sorting plastics for recycling, which employs several local people. He wants to expand his business but lacks the finance to do so. This is exactly the kind of enterprise that impact investing could help.
AAA’s analysis partner Anthony Johnson stated, “Impact investing is not only a cutting edge and very effective way to help those in developing countries to work themselves out of poverty, it is also an extremely popular alternative investment route for investors with a social and environmental.
The beauty of impact investment is that a small loan can make a huge difference to a community, explained Mr Johnson. He added, “Small loans can help small businesses take on more employees, whose children can then go to school instead of being sent out to work, which helps to make communities better-educated and stronger in the long run."
Now, JP Morgan and The Times of India are teaming up to launch an award for businesses that have a major social impact. Awards organizer Rahul Kansal told the BBC, “Increasingly we are seeing that in a country like India, there are avenues like healthcare, education, civic areas like waste management which need attention.
"The government cannot cope with the size of the problem. This is where organizations both for profit and non-profit can step in,” he added.
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