Investing In Asia

Market Overview

With some of the fastest growing economies in the world and as home to the majority of the global poor, it is no surprise that Asia’s social enterprises are increasing in number and diversity. Development and investment funds are beginning to flow not only to microfinance institutions but also to for-profit companies engaged in alternative energy, fair trade, eco-tourism, rural education, IT, and health care reform. (Note: Investing in India is detailed in a separate regional guide.)
Asia

Opportunities

  • Business-enabling environment. Asia is home to an incredible number of entrepreneurs, and many of its cultures have a strong entrepreneurial bent. While much of the capital available for social entrepreneurship is found in Singapore and Hong Kong; other countries, like Indonesia, Vietnam and Cambodia, are also emerging as new hotbeds of social enterprise activity. Singapore and Hong Kong in particular have a highly-educated workforce, low currency risks, sophisticated regulatory environments, strong investor protections, and highly developed business infrastructures (including local arms of international financial service providers). Indonesia, Vietnam, Cambodia and, newly, Myanmar, have innovative grassroots models of social enterprise to address poverty, many of which have been adapted from the early leadership of India.
  • Production costs. Much of Asia has experienced a boom in manufacturing over the last few decades. Businesses in this region benefit from their proximity to relatively low cost labor and extensive manufacturing capabilities in countries like China, Vietnam, and Bangladesh.
  • Growth of Islamic finance. Over the last decade, Muslim populations in countries like Indonesia, Pakistan, Bangladesh, and the Philippines have grown, creating opportunities for new financial instruments—such as Shariah-compliant funds—to play a role in supporting social enterprises.
  • Changes in tax law. Across Asia, many countries prohibit NGOs from actively investing in funds, requiring them to keep assets in savings accounts. Some countries have now begun taxing the revenue-generating activities of NGOs, spurring many to change their legal status and creating a greater incentive for new organizations to select a for-profit legal status.
  • Increasing government support for social enterprises. In the recent past, several Asian governments have announced strong support for the growth of social enterprise. This includes the announcement of several new funds. The government of Thailand has developed a Social Enterprise Master Plan for 2010-2014 and is working on creating supportive regulations for social enterprise through the upcoming National Social Enterprise Act.

Challenges

  • Direct investing. Due to exchange controls and restrictions and requirements regarding foreign ownership of equity, especially in countries like China, it is sometimes difficult to make direct investments in social enterprises. Many outside investors avoid the complications by investing in an offshore holding company. Fluctuating currencies can further complicate the
    technicalities of direct investing.
  • Investment options. Locating investment-ready social enterprises in Asia can be difficult due to the nascent state of the social entrepreneurship landscape. A certain degree of risk aversion also exists in some countries, where more work is needed to create and incentivize an entrepreneurial culture. Due to this, investors must be more flexible in terms of the sectors and/or impact areas that they target.
  • Deal structuring. Low levels of financial sophistication among entrepreneurs and startup enterprises require investors to use primarily straight equity or debt in lieu of hybrid investment instruments.

Global Team with Local Impact. Mr. Ming Wong recently invested in One Earth Designs, a company focused on providing low cost solar cookers, heaters, and generators that reduce indoor pollution. Founded by two students from MIT and Harvard, this three-year old company assists rural villagers in northern China and other developing countries where firewood is scarce and dry waste is often used as a fuel of last resort. The company is incorporated in Hong Kong, where Mr. Wong is based, and benefits from the region’s low taxes, legal protections, and the nearby manufacturing expertise in southern China. After two years of intensive, on the ground mentoring of the founding team and of watching their vision become reality, Mr. Wong is excited about One Earth Designs’ progress and recent funding from the DOEN and Calvert Foundations. Mr. Wong credits the success of this deal with his ability to cultivate a relationship with the founders over time, work closely with them as their ideas evolved, and build mutual trust as their team and operations became investment ready.

Resources

  • Asia Community Ventures. Non-profit organization based in Hong Kong formed to promote collaboration among key players in the social sector ecosystem and to catalyze the flow of ideas and capital for a sustainable society. http://www.asiacommunityventures.org
  • Asian Venture Philanthropy Network (AVPN). A membership-based non-profit organization dedicated to building a high impact venture philanthropy community across the Asia Pacific region and providing networking and learning services for members. http://www.avpn.asia
  • Association of Sustainable and Responsible Investors in Asia (ASRIA). A Hong Kongbased non-profit membership association dedicated to promoting sustainable finance and responsible investment (SRI) in the Asia Pacific region. http://www.asria.org
  • GIINSENG (formerly the Hong Kong Social Investor Club). An educational non-profit organization promoting impact investing in Hong Kong and China by providing members with an opportunity to learn about impact investing through engagement with entrepreneurs and investments in social enterprises. http://www.giinseng.org
  • Hong Kong Social Entrepreneurship Forum (HKSEF). A membership-based organization dedicated to promoting and supporting the development of social entrepreneurship. http://www.hksef.org/index_en.php?cid=4
  • Impact Hub. A global network of people taking action towards a single purpose: impact. http://www.impacthub.net
  • Impact Investment Exchange (IIX). As the sister company of Shujog, IIX aims to be the home of Asia’s first private and public platforms for social enterprises to raise capital efficiently. http://www.asiaiix.com
  • Impact Investment Shujog Ltd. An advocacy, research, and capacity-building non-profit social enterprise seeking to foster growth, maturity, and innovations to the social enterprise and impact investment sectors of Asia. http://shujog.org
  • Singapore’s Social Innovation Park Ltd (SIP). A not-for-profit organization that incubates social entrepreneurs and innovators worldwide to bring positive innovations to lives and societies. http://www.socialinnovationpark.org
  • Social Ventures Hong Kong (SVhk). A venture philanthropic organization, aiming to provide financial and non-financial support to Social Purpose Organizations or Social Enterprises in Hong Kong. http://www.sv-hk.org
  • SOW Asia Foundation. A non-profit providing financial resources and strategic support to social enterprises focused on poverty alleviation, healthcare, education, and the environment. http://www.sowasia.org
  • STEP Philanthropy Hong Kong. Membership-based group of legal, accounting, and financial services professionals who work with both private and corporate clients on trust, estate, tax, asset protection, and financial planning matters. http://www.step.org/stimulating-philanthropy
  • Toniic Asia. Toniic is a global network of action-oriented impact investors. https://www.toniic.com

right-arrowleft-arrow