Leading up to the G8 Impact Investment Forum on June 6th, which will be hosted by British Prime Minister David Cameron, LeapFrog Investments released new business numbers today to demonstrate that investors can merge financial results with social impact.
A global impact investing fund that primarily invests in insurance and related financial services to emerging consumers in Africa and Asia, LeapFrog now reaches 23.7 million people, 13.2 million of whom are poor or low-income.
In 2012, LeapFrog’s portfolio of companies recorded an average revenue increase of 24.6 percent. In comparison, the average growth in financial services in the home markets of LeapFrog’s companies was 17.4 percent.
The rise of the emerging consumer
“We are witnessing the rise of the next billion consumers, and the companies that are able to serve them at scale will be the iconic businesses of the future. Across 11 countries, our companies sell products that benefit more people than the populations of London, New York City and Hong Kong combined,” said Andrew Kuper, Founder and President of LeapFrog.
“These latest results show categorically that low-income people are willing and able to pay for affordable financial services, and that the private sector can serve this vast new market. For investors, there does not have to be a trade-off between financial performance and impact.”
Low operating costs in high-growth markets
Another reason for the success is the significant reduction in operating costs, allowing companies to reach low-income and underserved communities at unprecedented scale.
One example is LeapFrog’s portfolio company Bima, which sells and administers insurance via mobile phones, dramatically reducing marketing costs and increasing collection of premiums. The company sells policies in countries such as Ghana and Senegal for as little as $0.20 to $6 a month, and has reached 1.6 million people with the benefits of life and health cover in less than two years.
Mahindra Insurance Brokers has also pioneered distribution to rural customers by leveraging the Mahindra Group’s extensive vehicle distribution network. The insurance company now serves 5 million people by protecting assets such as tractors and farm equipment for as little as one dollar a month.
Providing capital and expertise
Operating in emerging markets often requires providing both capital and expertise.
“It isn’t easy operating in emerging markets, or serving the underserved. We help our portfolio companies address challenges by providing them with specialist operational support alongside capital, including an in-house team of actuaries, product design developers and alternative distribution experts,” said Kuper.
“Our partner companies are reaching customers lower down the income pyramid than was once imagined possible with quality products. The evidence is in that profit-with-purpose business works. For us, and for other investors and innovators in emerging markets, this is just the beginning.”
Source: LeapFrog Investments