Small-scale social impact funds established in Armenia, Georgia and Ukraine have built up diverse investment portfolios, offering hope they can scale up further to tackle major local challenges.
Pioneering social impact funds established in Armenia, Georgia and Ukraine as part of the EU-backed Collaborate for Impact initiative have made headway, proving resilient and agile in adjusting to testing local conditions, according to Impact Europe, the industry association overseeing the programme.
The five-year initiative to help establish an ecosystem to support impact and social entrepreneurship in a group of eastern European countries with stark social challenges but little history of impact investing, was conceived in a different world from the one in which it has ended up operating.
Its launch in September 2020 happened at the height of the COVID pandemic. Since then, Impact Europe’s local partners have had to adapt to the outbreak of war in Ukraine, periods of unrest in Armenia and Georgia, and the impacts of a turbulent global geopolitical and economic backdrop.
In a report on Collaborate for Impact, as the initiative nears its close, Impact Europe highlighted successes in establishing new social impact funds and related social investment despite the challenges.
In Armenia, the VIA Fund was established as an investment vehicle by Collaborate for Impact’s national partner Impact Hub Yerevan. In Georgia, the Actio Impact Fund was set up by the Centre for Strategic Research and Development of Georgia (CSRDG). Meanwhile, the Ukrainian Social Venture Fund (USVF) was created by partner SILab Ukraine.
These funds have provided financial support to a total of 91 social enterprises and non-financial support to over 250 enterprises. In total, EU funding of €1.2m – comprising €900,000K towards the newly established impact funds and €300,000 from its COVID Relief Fund – catalysed a further €1m of social investment, mostly in loans.
Moldova and Azerbaijan also came under the scope of the Collaborate for Impact project. In Azerbaijan, progress towards developing an impact fund has been slow, but in Moldova, Impact Europe’s national partner, EcoVisio, has recently secured additional funding that should allow it to set up its own impact fund.
Commonalities
Nazareth Seferian, a knowledge expert at Impact Europe, told Impact Investor the region’s shared Soviet era legacy contributed to the countries sharing several social challenges that can benefit from impact investing.
“Among this group of countries, there is actually a lot of commonalities in terms of the social issues that were a priority when the project started,” he said.
Among them are issues with disabled people not being integrated into society, the role of ethnic minorities, and a gulf in economic standards between rural and urban areas.
These and other shifting challenges are reflected in the work of some of the investee companies which have received backing from the impact funds.
For example, in Armenia, the local impact fund Via has invested in the Caritas Aregak Foundation, whose bakery staffed by people with Downs Syndrome was the subject of a recent euronews video. In Georgia, Actio has invested in Tene, a company manufacturing USB cables using single-use secondary plastic, such as bottle caps.
In Ukraine, the Museum in the Dark received its first funding of €40,000 in 2022 followed by a second tranche via blended finance in 2024. Visitors experience museum exhibits in the dark, allowing those without visual impairment to experience what it is like to go through life without sight, while the museum also provides employment for visually impaired war veterans.
Other portfolio investments across the three countries include a clinic in Ukraine providing rehabilitation for people with mobility issues that now include those with war injuries, an enterprise in Armenia focusing on providing training and meaningful employment to youth with autism and speech-language delay, and an enterprise promoting traditional jewellery-making in Georgia.
Stakeholder engagement
Impact Europe built up interest in the initiative by bringing stakeholders together at its annual Impact Week, which took place in Bilbao last November and other events, both in the countries themselves and around Europe, as well as offering further learning opportunities and mentoring.
Engaging with national and local authorities to promote impact investing has been another key aspect of the work of Impact Europe and its national partners in a region where the sector is often still regarded as akin to charity rather than offering investment opportunities.
The organisation estimates that for every €1 spent on stakeholder engagement, over €5 found its way to the local funds, and that a total of €8 came back as funding, if other related local impact initiatives were included as well. Impact Europe also said that over a quarter of stakeholders engaged through its efforts contributed either directly towards the funds or other impact initiatives of partners in the region.
Funding to investee companies has taken various forms, including grants, blended finance and low-interest loans. Funders have included financial institutions, such as local asset managers, pension funds and banks, as well as foundations and individual donors.
Building momentum
The Collaborate for Impact initiative formally ends later this year, though Impact Europe is in talks with the EU over renewing it. Seferian is confident that the impact funds have proved their value and will build on their work so far, even if the project is not extended.
“Most of the investments in these social businesses have only happened within the last two or three years, so we are only now seeing the impact of those investments and it’s a persuasive story. That should help these organisations fundraise more and continue these activities. I am optimistic,” he said.
Impact Europe is also building on lessons learned from Collaborate for Impact and its prior experience in developing small funds in countries such as the Czech Republic, Hungary, Croatia and Estonia in its operations elsewhere.
Seferian said the organisation was now using its in-house expertise and knowledge, plus that of its members, to pursue similar ventures in other regions.
“The approach works if you have a good partner on the ground. We believe in the model. We see the results in a range of different countries, and we are working on taking it to other parts of the world, while reinforcing the work that we’re already doing,” he said.
Impact Europe is already part way through a project using a similar approach in seven countries in the Middle East and North Africa region and has just started a new project working with six countries in the western Balkans. It is also looking at possible similar initiatives in central Asia and sub-Saharan Africa.
