References to catalytic capital pop up with greater regularity across our community of impact investors. An emerging definition describes catalytic capital as investment capital that is patient, risk-tolerant, concessionary, and flexible. The financing gap for certain high-impact enterprises, (e.g. agri-businesses, affordable housing, education, healthcare) is even more pronounced than the generally existing SME gap due to sector specific (perceived) risk-return profiles that prevent them from becoming ‘bankable’, the expert knowledge required to access and assess the deals and the typically small nature of the deals.
The ongoing concessionary support of commercially unsustainable or (perceived) high-risk investments is often discouraged due to the perceived market distortion of catalytic capital. However, there is a role for catalytic capital between grant funding and commercial investments to provide longer term support of investments in meeting the needs of the people and the enterprises that deliver deep impact. If as a community we are to catalyze and grow these types of opportunities we need to deploy capital that is returnable and can be recycled.
During this session, we will meet a catalytic capital provider and an agri-business investor to discuss the funding challenges, risk perception, the use and benefits of catalytic capital and the need for more such capital in the pursuit of greater impact.