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Revised green fund strategy incentivises economic impact and sustainability

Home Business Management Finance & Investment Revised green fund strategy incentivises economic impact and sustainability

NEDBANK announced the launch of a R10 million Indalo Fund at the Indalo Inclusive Symposium at the Council for Scientific and Industrial Research. The Indalo Fund is designed to change the way entrepreneurs are funded, creating a pipeline of viable businesses that will be ready to attract high-ticket investment.

Poovi Pillay, executive head of corporate social responsibility at Nedbank, explains that the Indalo Fund builds on the successful partnership between Indalo Inclusive and Nedbank, which has seen the creation of 215 enterprises with an average income of R5,933,283 each. Many of these enterprises are now at the stage where they can become eligible to attract larger investments from commercial lenders to scale significantly.

“When we launched our commitment to a green economy that works and delivers on the United Nations Sustainable Development Goals, we were clear that we wanted to make a significant positive impact to help create a new type of economy,” says Pillay. “Building on our experience over the past three years, we have decided to enhance the funding model in the final phase by introducing incentive- and performance-based grants.”

“This has important implications. For us, it means that we can fund more enterprises with the same capital, and for the enterprises, it validates their status as investment-worthy businesses.”

The current Indalopreneur programme covers 4 phases, each at its own grant level. The final phase, Indaloaccel, is reached by enterprises with a business model that already has been proven to be successful. These enterprises are considered ready for investment. The new Indalo Fund will come into play only in the Indaloaccel phase.

In terms of the new funding principles, enterprises receive 50% of the R250,000 Indaloaccel grant at the outset if they commit to creating a minimum of five full-time jobs at the minimum wage. They will also have to reach a number of targets relating to their environmental, social and economic impact.

Those enterprises that exceed their targets by 100% within 12 months are rewarded with the payment of the remaining 50% of the grant. Those who achieve only 50% above the job-creation target will receive only half of the remaining 50%.

“In other words, we are linking the final R250,000 to the ability of the enterprise to reach and exceed agreed-upon targets. This is an important new approach because it prepares them to grow out of grant dependence and make them compete for funding from investors who want returns instead,” says Pillay. “It also means that part of the capital committed by Nedbank is recycled, enabling us to help more entrepreneurs. Our calculation is that by making part of the Indaloaccel grant potentially recoverable, we would be able to reach an extra 8 enterprises.

“Overall, our aim is to increase the impact that our funding makes.”

The 1st phase of the Indalo Fund will run for 18 months, during which its entire capital of R10 million will be disbursed, although some of this money will be recoverable as described above. At this point, it will need recapitalising and will then run for a further 36 months. Nedbank and Indalo Inclusive will conduct a comprehensive impact assessment at the end of this five-year period.

In 2021 Nedbank decided to apply 80% of its corporate social investment (CSI) spend in projects that link environmental sustainability and the economic growth the country so desperately needs. This Green Economy CSI Strategy aims to develop an ecosystem of partners working together towards common goals, with a special focus on sustainable economic growth that empowers rural and semi-urban communities in particular.

The Indalopreneur Programme is key to this strategy, linking job creation and inclusive economic growth with the development of a new generation of environment-friendly businesses. These businesses are identified and mentored through the four phases of the Indalopreneur Programme by means of the South African Green and Inclusive Enterprise Awards and Support Programme.

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