Low- and lower-middle-income (LMI) populations in emerging markets – those who make between $2 and $8 per day – collectively spend $3 trillion per year. What this surprising figure means for investors is an unprecedented opportunity to create both social impact and financial return. So concludes a new research report by Omidyar Network entitled Frontier Capital: Early Stage Investing for Financial Returns and Social Impact in Emerging Markets, announced at SOCAP 2015 in San Francisco (Oct. 6-9).
The Frontier Capital report is a follow-up to the 2013 report entitled Priming the Pump for Impact Investing, which argued for a sector-based approach to impact investing. Now, the Frontier Capital report presents a new model for how to segment the enormous impact investing opportunity in emerging markets.
I sat down with Paula Goldman, global lead for impact investing at Omidyar Network and co-author of the Frontier Capital report, to dig deeper.
The Omidyar report rigorously segments the frontier capital opportunity into three parts, in order from most familiar to most creative:
Omidyar Network would like to see the frontier capital movement take hold and shape the next wave of impact investing. Goldman will be watching for a shifted volume of deal flow, reflected in future EMPEA reports, as evidence of change. “I see this as the impact opportunity of a generation,” concluded Goldman as we wrapped up our conversation.
I agree. The time has never been better and the need has never been greater for long-term thinking, patient investing in infrastructure, and collective action to combat income inequality. Which VCs, impact investors, high-net-worth individuals, development finance institutions, governments and entrepreneurs will leverage these untapped opportunities to lead the way to a sustainable financial and social future?
Image credit: Used with permission of Omidyar Network