Overcoming Barriers to Scale: Institutional impact investments in low-income and developing countries

The report identifies seven primary and secondary barriers to institutional impact investing, including a shortage of attractive deals, lack of track records, and limited exit options. It suggests that governments can mitigate these by strengthening the investment pipeline through technical assistance and seed funding, and by promoting blended capital arrangements. The authors propose the National Impact Investment Readiness Assessment (NIIRA) tool to help investors and policy-makers evaluate the quality and scalability of a country's impact investment pipeline. A case study of India illustrates the role of pioneering firms like Aavishkaar and IntelleGrow in building a supportive entrepreneurial ecosystem.

• Institutional investors face seven key problems that hinder the scaling of impact investments: primary problems include investment risk/return profiles, investment track records, exit options, and sourcing deals/investment costs; secondary problems include impact measurement, the blended capital curve, and scalability.
• There is a significant supply gap in the impact investment market because few deals meet the market-rate return requirements of financial-first investors. For example, a Monitor Group study in sub-Saharan Africa found that only 32 per cent of 439 promising inclusive businesses were commercially viable with the potential to achieve scale.
• Impact investments are predominantly illiquid, as approximately 90 per cent are made via private equity or private debt. The lack of initial public offerings (IPOs) in developing countries limits exit options, often leaving share buy-backs or sales to strategic buyers as the only routes.
• Governments can increase the supply of investment-ready ventures by providing technical assistance, seed funding, and promoting successful business models, such as the seven models identified by the IFC (e.g., micro distribution and retail, and smallholder procurement).
• Securitization and alternative fund structures can enable blended capital arrangements by dividing risk into tranches (senior, mezzanine, and junior). This allows impact-first investors to absorb higher risks in junior tranches, making the senior tranches attractive to institutional investors with strict fiduciary duties.
• The authors introduce the National Impact Investment Readiness Assessment (NIIRA) framework, which evaluates five areas: national political and economic context, impact investment policies, financial industry initiatives, ecosystem completeness, and global fitness.
• In India, a combination of government priority sector lending requirements (requiring banks to direct 40 per cent of loans to priority sectors) and pioneering firms like Aavishkaar, IntelleGrow, and I3N has helped build a domestic impact ecosystem.
• Institutional investors in the impact sector suffer from knowledge gaps regarding emerging market-specific risks and the actual business-model risks, which differ from traditional private equity models.

APA

Huppé, G. A., & Silva, M. H. (2013). Overcoming Barriers to Scale: Institutional impact investments in low-income and developing countries. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/overcoming_barriers_to_scale.pdf

Chicago

Huppé, Gabriel A., and Mariana H. Silva. Overcoming Barriers to Scale: Institutional impact investments in low-income and developing countries. International Institute for Sustainable Development, 2013. https://www.iisd.org/system/files/publications/overcoming_barriers_to_scale.pdf.

Wikipedia

{{cite report |last1=Huppé |first1=Gabriel A. |last2=Silva |first2=Mariana H. |title=Overcoming Barriers to Scale: Institutional impact investments in low-income and developing countries |publisher=International Institute for Sustainable Development |date=July 2013 |url=https://www.iisd.org/system/files/publications/overcoming_barriers_to_scale.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{hupp2013overcoming, author = {Huppé, Gabriel A. and Silva, Mariana H.}, title = {{Overcoming Barriers to Scale: Institutional impact investments in low-income and developing countries}}, institution = {International Institute for Sustainable Development}, year = {2013}, month = jul, url = {https://www.iisd.org/system/files/publications/overcoming_barriers_to_scale.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }