Tell us about the inception of the RISE fund. How did early conversations with stakeholders go?
Prachi Maheshwari (PM): As you know, the COVID crisis first appeared in China. We’d been tracking the Chinese market for some time, to assess its impact on South East Asian supply chains, which are closely correlated. We were also reviewing reports on COVID impact on SMEs in China. So back in March we did a very early and rapid assessment of the economic impact of coronavirus on WSMEs in Southeast Asia based on learnings of its impact in China. We found that WSMEs in our own portfolio were facing potential bankruptcy in 3-6 weeks due to plummeting revenues, liquidity challenges, broken supply chains and productivity issues. Hence, we realised the urgency of a rapid COVID response: anything that comes after a month or two is already too late.
James Soukamneuth (JS): We looked at a lot of crisis management and mitigation measures as models. In particular, the Philippines has a lot of typhoons as well as other places in South Asia. And what stuck out in how donors and governments were responding to those crises is that there are at least two phases. One is an emergency relief phase, where you’re just trying to save lives, reduce economic loss and alleviate suffering. Second, there’s a recovery phase, focused on repairing socio-economic infrastructure, including re-employment. So that drove how we structured the RISE Fund and how we socialised it with our senior management and our Australian government client. In terms of the two facilities, the emergency relief facility is about A$1m and the resilience facility is about A$2m (and we are still fundraising for it) – this is to provide risk capital to women-owned and women-led SMEs in the Philippines, Indonesia and Vietnam.
How was this facility different from existing government response measures?
JS: In three ways. One is that most of the economic stimulus measures will likely go to the manufacturing sector, where there’s a low representation of women’s SMEs. The second is that governments respond slowly – so that’s our advantage to really be nimble and implement as quickly as we can. And then finally, a lot of relief measures by banks and financial institutions will be geared towards existing borrowers. And those existing borrowers will, from our view, reinforce gender biases. So, we were trying to make the case for why we needed to act swiftly and address an important area of economic recovery likely to receive less attention. While governments and DFIs continue to develop fiscal and economic stimulus packages to support businesses impacted by the COVID crisis, women’s SMEs may not widely benefit from such interventions in a timely manner.
How long did the process take, from inception to launch?
JS: March to May. We did the rapid assessment in March. And then we proposed the concept to our Australian client managing Investing in Women in April, who were very supportive and approved it by the end of April. Then we worked with our existing investment partners to implement in late May. So, it happened relatively quickly. And it wasn’t just us, it was the whole machinery of Abt Associates, which implements Investing in Women, with the support of the Australian Government and committed investment partners on the ground.
Do you think that speed to market is going to be one positive outcome of the crisis for future vehicles, or is it an exception?
JS: Well, let’s unpack what that means – how do you implement crisis management effectively? You have to work through existing assets and infrastructure on the ground, right? So, we’re not going out there with the RISE Fund bringing on new partners. We have four existing partners (across South East Asia with assets, staffing, on the ground) that can mobilise immediately. The ‘fly in, fly out’ model we knew is not going to be effective anywhere in the world for the next 12 months at least. It’s one thing having a good idea, but who’s actually going to implement it on the ground? It’s the people that are there now and aren’t going anywhere for the next 12 months.
What has happened since RISE was launched in April?
PM: We’ve launched and disbursed the emergency relief support. What Investing in Women already had in the market was the infrastructure to implement any response quickly. So, we had all these impact investing partners on whom we had already done due diligence and they had been investing for us for the last 3- 4 years. Immediate capital infusion was required to keep many of the investees afloat and resilient through the COVID crisis and resulting economic downturn. At the early stages of their growth trajectory, many of these companies were on a solid path of becoming cashflow positive and were required for the essential services and post-COVID economic recovery of the region.
For example, a maternity hospital in Vietnam: it’s a critical service which is required irrespective of the pandemic. Or the businesses providing food security and groceries on the ground. Through these businesses were facing short term disruptions, the underlying fundamentals looked otherwise healthy. RISE Fund emergency financial support included a small grant support in the case where businesses hadn’t been able to pay salaries for the last couple of months, plus debt or equity infusion based on their financing needs. We provided support to around 11 companies within a period of one month, via our impact investing partners, at a very quick turnaround.
JS: Currently, our program has invested in 27 companies across South East Asia, so the first thing that we wanted to do was make sure we could support these companies through this crisis and moving forward. To inform our decision making, we had to assess damages and take stock of our work at Investing in Women, which has been around since 2016. Unfortunately, the COVID crisis risks undoing many of our programmatic gains, unless immediate efforts can mitigate the economic fallout and prepare for post-COVID recovery. What was really uplifting to discover in the rapid assessment was that a third of the investees had stable or neutral outlook with healthy underlying business fundamentals. If we’d found that all 27 companies were about to go bankrupt, then the last thing we’d want to do is to throw good money after bad.
What were the challenges, and how did you get around those?
PM: What you are grappling with is a very systematic challenge rather than operational challenge – there’s a huge gap in the market for gender-smart responses to COVID. For example, if you look at the OECD policy review of SME policies of both emerging countries as well as developed countries across the world, gender/allocation of funds for women-led businesses is absolutely missing. And despite all the huge commitments for gender-smart investing right now responding to the crisis, there is a tendency to have a gender-blind approach.
JS: I think operationally the biggest challenge is that this is an AU$3 million COVID response and recovery fund, and we think it should be much larger, well over $100 million. We would love to see other market players doing more and moving capital with a gender lens during this awful period. The RISE Fund is a drop in the bucket, compared to the need.
So, for people who are further behind on the COVID curve and who are still trying to work things out – have you got any advice for other people launching funds about how to go about it or what not to do?
PM: What is critical is to look at the existing vehicles and programs which are currently operational in the market, and work with them. A lot of organisations are getting into a whole new design phase and then they’re trying to operationalise it, which typically takes a lot of time – setting up these new partnerships can take three to six months at the minimum, and this is not the time to do that. So, if you want to provide a COVID response, go with the existing infrastructure, there are enough credible impact investors operating around the world [to partner with].
JS: I’d like to echo that view. Time is of the essence. There are COVID response and recovery facilities or other grant facilities coming out. But they’re asking people to submit proposals. And by the time that happens, and they negotiate a grant agreement, it’s going to be six months down the line. That time lag really informed how we wanted to work. To the extent possible, this isn’t the time to be developing new partnerships—it’s really about doubling down with the partners you have. For all of us, 2020 is crisis management and survival mode. How do you produce results in such an environment?
What are the next steps for RISE, how would you like the program to evolve?
PM: We have already implemented the emergency support although that was only for our existing portfolio, given the limited capital we had. We are now moving on to the resilience phase, where the plan is to increase the liquidity for more women-led businesses in the market. Because in South East Asia, specifically for gender lens investing, most of the capital which gets allocated comes from the West. And with the crisis, what we are seeing and expecting is there’s going to be this global retrenchment and impact investors in the region are going to struggle to close their funds.
Through the Resilience Facility, we’re trying to target that issue wherein our impact investors can now come to us on a deal by deal basis. Our mandate is that our partners go out and bring in co-investments from the private sector. We are trying to catalyse private sector investment during the crisis period by providing the catalytic support to our partners. And as of now, we have AU$2 million set aside for the Resilience Facility of the RISE Fund. But we’re also in parallel fundraising from the market to see if other funders and donors are interested to partner with us to move capital expeditiously with a gender lens over the next 6-12 months.
This interview was originally published on the GenderSmart website.