APEC Business Advisory Council (ABAC) Indonesia, the private-sector arm of the Asia-Pacific Economic Cooperation, has partnered with venture capital firm Mandiri Capital to establish a fund that will focus on investments in start-ups with a social impact.
Mandiri Capital president director Eddi Danusaputro said on Thursday that the fund, called Indonesia Impact Fund (IIF), would focus on investing in micro, small and medium enterprises (MSMEs) and start-up firms related to the five aspects of the United Nations Sustainable Development Goals (SDGs).
They are poverty alleviation, affordable health care, high-quality and accessible education, increased economic participation for women and sustainable cities and affordable housing, he said.
“The investment in those ventures will not only focus on commercial return but also on the social impact of our investment,” Eddi said during an online press briefing.
The firms aim to raise US$10 million in the fund’s assets under management (AUM) by its first close of funding in the second quarter of 2021. It also expects to raise a total of $25 million by the fourth quarter of next year.
Eddi was confident that the fund could reach its target on time as impact investing in Indonesia still had ample room for growth.
According to Mandiri Capital, quoting the Global Impact Investing Network data, private impact investors had invested $148.8 million between 2007 and 2017 under 58 deals. In comparison, the country’s internet economy managed to record $3 billion in funding and 181 deals in 2017 alone.
Angel Investment Network Indonesia (ANGIN) also recorded 83 investments amounting to $267 million by impact investors between 2013 and 2020, its “Investing in Impact in Indonesia 2020” report notes.
Meanwhile, in 2018, lending platform Mekar estimated that Indonesia would offer $23 billion in impact investing opportunities in various sectors over the next five years, or until around 2023.
As it continues to seek limited partners, IIF also plans to channel its first round of investments into several MSMEs and early-stage start-up firms, Eddi said.
“We have five to 10 companies for each of the five aspects we’re focusing on from various sectors, such as health care, education and agriculture,” he said.
However, the fund management team has yet to decide on which start-ups to invest in as it is currently establishing a framework to measure the businesses’ social impacts, he added.
Eddi also hoped that the IIF could be a tool to invest in SDGs initiatives, as well as make impact investing efforts in the country be more integrated.
ABAC Indonesia member Shinta Kamdani said 8the fund would focus its investment on MSMEs or start-up firms with big potential but have difficulties in getting funding to grow their businesses.
The investment would also not be limited to any particular business sector, she said.
“As long as their business model shows that they are able to make a social impact, we will consider investing in the business.”
Meanwhile, ABAC Indonesia chairman Anindya Bakrie said he hoped the presence of the IIF would not only support economic inclusion and the achievement of SDGs but also empower start-ups to recover from the impacts of the COVID-19 pandemic.
The pandemic has heavily battered Indonesia’s economy, sending it into its first recession since the 1998 Asian financial crisis, with the country’s gross domestic product (GDP) shrinking by 3.49 percent on an annual basis in the third quarter. It was the second consecutive GDP drop after the economy shrank by 5.32 percent year-on-year in the second quarter.
The IIF is also expected to complement the government’s Sovereign Wealth Fund (SWF), currently in the process of being established, Anindya said.
Indonesia is planning to launch the SWF by January 2021 to attract more investment and support the economy amid the impacts of COVID-19. The wealth fund will be called the Indonesia Investment Authority.
“Due to its smaller size, we expect that the fund could act as a complementary institution to the SWF and would focus its partnership on non-profit institutions like the United Nations Development Program [UNDP],” he said.
The fund will also partner with other institutions to act as its investors, such as family offices that serve as private wealth management advisory firms for ultra-high-net-worth investors, foundations, corporations and state-owned enterprises (SOEs).
Anindya also said that the fund had approached several prospective institutions that would invest in it, including SOEs in both the financial and non-financial sectors, and planned to also welcome overseas investors.
In the meantime, he said other countries like Singapore and Taiwan had expressed their interest in establishing a similar institution to the IIF as it was a pilot project among other APEC countries.
“Hopefully, we can give a good example to other APEC members that want to participate in doing good and helping their country,” he said.