It pays to put cash in empowering people

Many investors are increasingly becoming aware that social impact is one of the most popular investment opportunities in Africa.

Impact investment is a way to put money into social ventures.

Typical recipients of impact investment and grants include education, agriculture, renewable energy, banking and small and medium-sized enterprises.

Investments can come both from foreigners who recognise the vast growth potential in the sectors mentioned, or locals looking to grow.

In the tech sphere, fintech, which means integrating technology in financial services, is trending in Africa right now.

It is using the most modern technologies to promote financial inclusion.

In Sub-Saharan Africa, this is especially important as many rural communities do not have access to banks. 

For smallholder farmers for example, lack of financial inclusion limits their profitability. Communities can easily be impoverished by low crop yields. They might also face difficulties in keeping up with output.

Changing lives

This is but one example of how mobile money and digital lending can change individual lives as well as our collective economy.

One of the pioneers in the fintech field is an app that almost all Kenyans are familiar with: M-Pesa.

Along with other Nairobi-based fintech companies, its growth has been stunning over the past few years.

This is why venture capital firms from China, London and San Francisco are flocking to Kenya to invest in the sector.

Nigeria-based fintech start-up, OPay just raised $120 million (Sh1.2 billion) in a Series B round from mostly Chinese investors. It will use the new funding to launch OPay services in Kenya and South Africa.

These kind of partnerships - between Africa’s three largest economies - are key to the financial development of our continent.

Within our own country, those with the means must inject their money back into the local economy. This should be both through the formal financial sector as well as the less formal and philanthropic sector.

If the rich do not have faith in Kenya’s economic growth, then small scale entrepreneurs will be less inspired to invest.

It might lead to a situation similar to the one witnessed in many Latin American economies in the 1980s and 90s, when people of means kept their money abroad because they lacked faith in their own economies. This ultimately led to economic chaos.

Local talent

Setting a good example for Kenyan businesspeople was probably part of  President Uhuru Kenyatta’s motive recently when he donated Sh100 million to build a new school and library in Kapsisiywa, Nandi County.

The complex will be located in Eliud Kipchoge’s hometown, honouring the athlete for his significant national and international achievements.

It is also a chance to acknowledge local talent and invest in the growth of future homegrown high achievers.

Simply put, the president was putting his money on a project with as much social impact as possible.

It was him saying that there is so much out there that can be done to touch a life and make a difference in the communities we live in.

Business owners and executives should follow this lead. They must strive to tap on the vast potential that lies in projects that touch as many lives as possible.

They must realise that there is so much potential in investing in people.

What one does with their standing and privileged status in society can be an investment in the millions of people out there.

One can either use the opportunities he or she is born with to maintain their status, or they can use these to invest in the community. All one has to do is find social gaps and aim to fill them.

Impact investors are clamouring for the fintech industry because they know that it will unlock Africa’s growth potential.

This, because it involves putting resources where they are most needed and where they will be most felt.

Mr Machio is a human resource expert