The impact of an investment will vary depending on the location and context of where it’s deployed; it’s heavily dependent on the needs of individual communities it seeks to impact. In many areas of the Pacific basic trade financing options aren’t available, this means access to a well functioning supply chain, along with commercial prices for materials, has the potential to make a big difference in people’s lives.
This is the problem faced by businesses in the Pacific that make and distribute reusable pads for women and girls. And a syndicate of impact investment organisations have sought to solve it.
The program was launched by DFAT’s Pacific RISE program and the Criterion Institute in 2018. With a focussed gender-lens, it aimed to identify opportunities to improve menstrual health in the Pacific with the help of novel finance structures.
Red Hat Impact and Lotus Impact were brought on board as intermediaries, to help refine the design of a Trade Finance Vehicle (TFV). They would also manage a first test of the program, which involved supply chain mapping and exploring opportunities for a more efficient flow of capital.
At its heart, the problem was an organisational one. The small-scale enterprises didn’t have access to reliable sources of high-quality raw materials. And without bargaining power, they were price-takers, which made their finished products painfully uncompetitive.
“The first challenge was to vastly improve reliable access to sufficient quantities of the key input materials these enterprises require to make reusable pads. This would help them take on and meet larger orders and underpin their growth. The second challenge was to improve the prices these enterprises pay for their input materials, primarily through aggregating enterprise level demand for materials then purchasing and shipping materials in bulk.” Paul Howarth from Red Hat Impact explains.
They needed relationships with Chinese manufacturers, a more efficient logistics system, as well as financing facilities to cover bulk purchase orders. None of which are possible for small-enterprises working alone, so they needed to collaborate.
The program design focussed on building a supply chain that recognised the challenges of serving dispersed communities in remote locations. It built a relationship with a mission-aligned Australian freight-forwarder to transport bulk goods through Brisbane, and on to the Pacific.
They managed to raise $US50,000 from 15 investors, to cover the purchase and delivery of the raw materials. This fund-raise was focussed on shifting the risk away from the businesses, while also engaging a core set of stakeholders, Cameron Neil from Red Hat Impact explains. “It’s key for this mechanism that the Pacific enterprises are not bearing the risk here – the lenders are. So it makes sense to spread the risk around. And strategically, this sets up for the future. We now have 15 investors engaged to grow with the TFV as it needs to provide further and larger amounts of capital.”
The impact is that the enterprises can now fulfill large orders, and they can plan further into the future. They have a reliable supply, at competitive prices, which gives the producers and their customers a profound sense of confidence to grow their businesses.
And the organisations continue to grow. “The enterprises that have purchased large quantities from the TFV have grown and will continue to grow as demand requires. Their growth is underpinned by a clear and growing market for reusable pads, and reliable access to larger quantities of materials at competitive prices on finance terms.” Paul Howarth says.
Most importantly, this ecosystem is ensuring an affordable supply of reusable pads for the women and girls of the region. Without access to these products, it can be difficult to manage their cycle hygienically and with dignity. It can deny women a range of opportunities to participate in everyday life.
Red Hat Impact were recognised for their work being awarded the Impact Market Builder of the Year prize at the 2020 Impact Investment Summit.