Understanding the Roles of NGOs/NPOs for Impact Investing This document discusses impact investing in Bangladesh and the roles of NGOs/NPOs. It provides an overview of impact investing, notable impact investment deals in Bangladesh, challenges faced by impact investors, and examples of social enterprises transitioning to blended models. Case studies are presented on BRAC implementing a development impact bond to fund innovative projects and Infrastructure Development Company Ltd receiving funding to promote private sector investment in energy efficient technologies for textile and garment sectors.

1. Understanding the Roles of
NGOs/NPOs for Impact Investing
Presented By
Bijon Islam
Co-founder & CEO
LightCastle Partners
1

2. Table of Contents
2
1 Impact Investing- a Recap
2 Impact Investment – What is Happening in Bangladesh?
3 Introducing Social Impact Enterprises
4 Notable Case Studies: Impact Investing

3. Let’s recall!
What is Impact Investing?
3

4. 4
Impact Investing – An analysis of Definitions

5. 5
“Impact investments are investments made with the intention to generate positive,
measurable social and environmental impact alongside a financial return.”
Impact Investing – The Result?

6. 6
• Emerging Asset-class that
focuses on “Beyond” –
Financial Return and
creates positive
social/environmental
impacts
• Typically made in private
markets by providing debt
or equity to mission-driven
businesses
• Return expectations:
concessionary to market-
beating. Potentially USD 1
trillion investment
opportunity (by JP Morgan)
Wide range of investors: including large-scale financial
institutions, pension funds, family offices, private wealth
managers, foundations, individuals, commercial banks,
and development finance institutions
Cash
Fixed
Income
Private
Equity
Public
Equity
Cash
Senior
Loan
Subordin
ate Loan
Equity
Grant
Support
Below Market Investments
Market Rate Investments
More Risk
Less Risk
More Risk
The Impact Investment Continuum
Adapted by F.B. Meron Foundation
Impact Investments
Happen in a spectrum between Impact, Risk and Return

7. Impact Investment –
What is happening in
Bangladesh?
7

8. 8
Who are the Investors in the Ecosystem?

9. 9
✓ Institutional investors (e.g. pension
funds, asset managers, banks,…)
✓ Traditional venture capital funds
✓ Most impact funds
✓ Most private investors & business
angels, crowd investors
✓ DFI’s
✓ Some impact and social venture funds
✓ Some private investors, family offices, (social)
business angels and crowd investors
✓ Venture philanthropists and some
foundations
✓ Foundations
✓ Private philanthropists,
crowd platforms (donations)
✓ Development agencies
Investors
expecting NO
financial return
Investors seeking
BELOW market rate
financial returns
Investors seeking
market rate financial
returns (or more)
Impact Only Impact First Finance First
Donations,
Grants
Equity, mezzanine,
debt, hybrid +
innovative
instruments
Equity,
mezzanine, debt
Who are these “Impact Investors” and what do they want?

10. 10
Capital Demand Side
Impact entrepreneurs
Beneficiaries = vulnerable, excluded, minority communities
Impact investors and
other funders
Ecosystem builders and
intermediaries
Facilitators, service providers Capital Supply Side
Snapshot of main stakeholders in an impact ecosystem

11. 11
More impact More commercial
Let‘s look at some examples: Where would you place them?
A big question:
What exactly is an impact enterprise – and what is not?

12. 12
Startup Funding Raised in
USD Mn
Investment Breakdown by
Sector
43.48%
23.71%
13.57%
43.48% in Fintech, 23.71% in Logistics & Mobility, 13.57% in
E-Commerce/Retail, 5.28% in Consumer Services
5
0.13 0
10.30
15.12
20.06
6.88 6.55
102.87
87.78
39.03
31.61
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Source: LightCastle Bangladesh Startup Ecosystem: Funding Landscape, 2020 Data
Are impact enterprises investible?

13. 13
Homegrown Startups
have raised USD 300Mn+ of foreign investment over the last decade
Full Funding Undisclosed
U$ 4.7Mn
TruckLagbe
Logistics
from
ARIA Group, Betatron &
Mount Parker Ventures
U$ 3.5Mn
Maya
HealthTech
from
Osiris, Anchorless Bangladesh
U$ 4.9Mn
SOLshare
cleantech
from
IIX Growth Fund
U$ 12.8Mn
Paperfly
Logistics
from
Ecom Express
U$ 9Mn+
Zero Gravity
(Sindabad & Kiksha)
ecommerce
from
Aavishkar VC & Frontier Fund
U$ 6Mn
Sheba.xyz
service marketplace
from
Epyllion Group, BFP-B DFID
and Local Angel Investors
U$ 26Mn+
SureCash
fintech
from
Osiris Group
U$ 8.8Mn+
BDjobs
job marketplace
from
SEEK
U$ 36Mn+
Pathao
logistics
from
GO-JEK, Osiris Group
Openspace Ventures, and
Battery Road Digital Holdings
U$ 19.6Mn+
Shohoz
logistics
from
Linear Venture,
Golden Gate Venture
U$ 28Mn+
Shop Up
Fintech and B2B Commerce
from
Sequoia Capital India, Omidyar
Network, Flourish Ventures
U$ 19.5Mn+
Chaldal
ecommerce
from
IFC, IDLC, Mir Group,
Y Combinator
U$ 81Mn+
Bkash
fintech
from
Money in Motion, BRAC Bank,
Gates Foundation & Ant Financial
U$ 10.6Mn
Praava Health
HealthTech
from
SBK Tech Ventures
and Angels
U$ 7Mn+
Bongo
entertainment
from
Razor Capital
Not an Exhaustive List*
Source: Databd.co, Crunchbase & LightCastle Analysis

14. 14
Notable Deals of 2021:
USD 33 Mn+ investments raised in first half of 2021
Source: LightCastle Partners Startup Dashboard
Startup Deal Lead Investor Investor Source Investment Type Investment
Pre-Seed Vint Valley Global Venture Fund $110,000
Pre-Seed _ Global Angels $200,000
Seed Robi Local Corporate $400,000
Seed IDLC Local Venture Fund $470,000
Seed
Anchorless
Bangladesh
Global Venture Fund $500,000
Seed Osiris Global Venture Fund $2,160,000
Bridge Skycatcher Global Venture Fund $3,000,000
Series A IFC Global DFI $3,000,000
Series A _ Global Angels $5,600,000
Series B Adjuvant Capital Global Venture Fund $6,000,000
Series A Ecom Express Global Corporate $11,800,000

15. 15
Expense Types:
• Setup Costs – Branding,
Legal
• Capital Expenditures
• R&D; Product Development
• Market Testing
Revenue Drivers:
• Friends and Family
Expense Types:
• Admin and Operations
• Marketing and Distribution
• Market Testing
Revenue Drivers:
• Early Adopters and Users
Expense Types:
• Admin and Operations
• Marketing and Distribution
• Product Development /After
sales
• Financing Expenses
Revenue Drivers:
• Early Majority and Late
Adopters
Expense Types:
• Product Extension/
Modification
• Marketing and Distribution
• Liquidation (if relevant)
Revenue Drivers:
• Early Majority and Late
Majority
Types of expenses and revenue
Drivers that vary across the lifetime of the impact enterprise

16. 16
Source: Stakeholder interviews; Dalberg analysis
Difficulty identifying
potential investees—
largely network
driven
Companies reluctant
to register as LLC in
order to qualify for
investment
Companies want
small investment,
cannot absorb large
capital
Investees reluctant to
use capital to grow;
instead see it as a
rainy day fund
Difficulty repatriating
investment
Small number of
desirable companies;
early entrants have
taken “low hanging
fruit”
Companies often
lacking accurate or
sufficient financial
records, unwilling to
share financials
Mismatch between
investor and investee
expectations; investor
expects controlling
share
Unclear investor
protection laws;
uncertainty about
legal recourse in case
of contract default
IPO exit process not
defined, no clear
regulations and long
lock in periods
Difficulty in raising funds
Difficulty in finding local talent to
manage fund
Limitations for local funds; many
investors set up overseas fund
Least Severe Most Severe
Key Challenges Faced by investors and severity of impact
Entry into Bangladesh
Pipeline
Development
Screening Due
Diligence
Structuring for
investment
Managing
investment/follow
up
Exit
Challenges faced by investors and asset managers

17. 17
Source: Global Innovation Index 2019,Startup Blink, [5]Crunchbase, AngelList, Xinhua net, Swiss Global Enterprise & LightCastle Analysis
Category United States China India Indonesia Bangladesh
Global Startup Ranking 1 14 23 54 98
Global Innovation Index[1] 61.73 54.82 36.58 29.72 23.31
Total Number of
Startups[5] 100,000+[3] 25,000+ 50,000+ 5,000+ 1,000+
Time taken to setup a new
business (days)
4-8 30-40 15-30 15-30 15-30
Corporate Tax Rate 39% 25% 34% 22% 25%-35%
Number of local VC
Firms[5] 1000+ - 700+ 300+ 25+
Number of Angel Investors 300,000+ - 1,800+ 5,000+ 200+
Number of Accelerators/
Incubators
1,500+ 12,000+[4] 250+ - 20+
[1] The Global innovation Index
ranks the innovation performance
of 128 countries based on 82
indicators
[2]Global startup ranking by
Startup Blink ranks the top 100
countries based on the
quantity/quality of startups and
enablers in the ecosystem coupled
with business environment and
critical mass.
[3] United States has the highest
number of startups in the world
[4] China ranks #1 in number of
incubators and accelerators
across the world due to Chinese
Government initiatives
Bangladesh Startup Ecosystem
Ranks far behind in comparison to the Global Startup Ecosystem

18. 18
Source: IMF, Crunchbase, Statista, Yourstory.com, Anchorless Bangladesh and LightCastle Analysis
Funding in Bangladesh
As percentage of GDP is significantly low
The already low Startup Funding State of Bangladesh (GDP 10x lower than India), (GDP 50x lower
than China) - is at stake due to COVID-19
$0.12 $0.03
State of Startup Funding in Southeast Asia (2018)

19. 19
Source: UNCTAD World Investment Report, World Bank Data
Foreign Direct Investment
Comparison with regional peers
Despite the excellent progress, the country’s Foreign Direct Investment (FDI) in CY 2019 stood at a mere 3% (U$
2.87Bn) of the country’s total investment. With policymakers devising policies to attract FDIs, investments are
expected to increase in the new decade
0%
1%
2%
3%
4%
5%
6%
7%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
FDI
as
%
of
GDP
Bangladesh India Indonesia Myanmar Pakistan Sri Lanka Vietnam
0.5% 1.8% 2.2% 4.2% 0.8% 0.8% 6.2%
(FDI as % of GDP, 2019)
Comparison with Regional Peers: FDI as % of GDP

20. 20
Source: World Economic Forum, Doing Business 2020 - World Bank, Doing Business- Economy Profile Bangladesh - World Bank, Destination Bangladesh - PwC
Doing Business Index
Govt. has taken an initiative to become double digit by 2025
Ranking in 2020
63rd
70th
73rd
99th
108th
168th
Bangladesh
The World Bank Group’s Doing Business 2020 study ranked Bangladesh 168th in
the global ease of doing business rankings this year from 176th in the previous
year.
The government of Bangladesh has undertaken a number of initiatives to improve
the ranking :
• Setting up a new business became less expensive with the reduction of
registration and name clearance fees and removal of the certifying fee for
digital certificates.
• In Dhaka, obtaining an electrical connection was made more efficient as the
city invested in digitization and human capital. At the same time, the country
reduced the amount of the security deposit required for a new connection.
• Access to credit information was improved thanks to expanded coverage by
the credit information bureau. This reform delivered Bangladesh’s most
significant improvement.
• Bangladesh Investment Authority (BIDA) has introduced an One Stop Service
Center to assist foreign investors.
Maldives
India
Sri Lanka
Vietnam
Indonesia

21. So what differentiates
impact enterprise from
the rest ?
21

22. 22
Social & Impact Enterprises
systematically build business model
beyond profit
profit
potential
profit
potential
old school not-
for-profits
old school
corporations
new school of
conscientious
entrepreneurs
+
+
-
-
What is Social Impact Enterprise?

23. 23
Impact Enterprises
Ordinary Enterprises
Generate
positive
financial
return on
investment
ALSO generate
positive
measurable
social and
environmental
impact
Generate
positive
financial
return on
investment
Contrasting ordinary enterprises and impact enterprises

24. 24
Understanding NGOs Understanding Impact Enterprises
NGOs cannot
personally or
monetarily profit
from their business.
Utilize strategic tactics
to earn commercial and
impact investment funds
Contrasting NGOs and impact enterprises

25. 25
Traditional
Charity
Social
Enterprises
Traditional
Business
Impact Investing
Achieve measurable social impact
alongside financial return
Primary driver is to
achieve social value
Primary driver is to
achieve financial value
Purely charitable
funding from
grants donations
or endowment
Additional
market-based
revenue
stream
Potentially self-
sustaining >
75% market
revenues
Social Busines:
Profits are
reinvested
Mission driven
for profit
enterprise
CSR & corporate
philanthropy
(target for SRI)
Pure profit
orientation of
regular investors
Business models of social enterprises
Business model spectrum revisited

26. 26
[ ]
Social
Enterprise
+ +
Traditional
Nonprofit
Traditional
Business
Added revenue
generating
stream
Legally declared
social purpose
Nonprofit Social
Enterprise
For-profit social
enterprise
Business models of social enterprises

27. 27
Impact Enterprises Business Model in a Spectrum

28. 28
KPI
FINANCIAL
HEALTH
CUSTOMER
RELATIONS
SALES &
MARKETING
HUMAN CAPITAL CAPITAL
BUDGETING
IMPACT
Sales Revenue
Sales Growth
Year-to-date
Gross Margin
Net Profit Margin
Lead to Client
Conversion
Rate
Customer
Acquisition
Cost
Target Group
Happiness
Customer Loyal
Customer Retention
Net Promoter Score
Customer Lifetime
Value
Gender Lens
Employee
Happiness
Revenue Per
Employee
Theory of Change
Defined Impact
Metrics
Measurable
SMART
Target Beneficiary
Market
-Increase in Income
-Better Health
-Empowerment
PBP, NPV, IRR, PI
Impact Enterprises:
KPI

29. Cases from Bangladesh
especially from Non-Profit to
Blended
29

30. 30
Implementing Agency: BRAC
Partner: British Asian Trust
Key Features:
▪ Impact bonds are a variation of the traditional payment by
results model, are the new paradigm for tackling recent
cultural change and overcoming the limitations of
traditional funding.
▪ The project is targeted towards implementing innovative
funding mechanisms and identify key sectors where
impact bonds might be most effective and have the
greatest impact in spurring sectoral growth.
▪ Key partner British Asian Trust aims sustainable
development projects that focuses on poverty eradication,
injustice and supports development impact bonds (DIBs)
through philanthropy
3. The outcome funder
(Govt. If SIB and 3rd party if
DIB) repays the investor if
metrics are achieved
1. The investor provides
upfront capital to the service
provider to deliver services to
a population in need.
2. An independent evaluator verifies
whether the service provider has
achieved pre-agreed impact metrics
Impact Bond structure
BRAC:
Development Impact Bonds

31. 31
Implementing Agency: Infrastructure Development Company
Ltd (IDCoL), a government-owned non-bank financial
institution.
Fund: Green Climate Fund, UN.
Amount: U$256 Million concessional credit line
Objective: The fund is targeted to promote private sector
investment through large-scale adoption of energy-efficient
technologies in the textile and garment sectors.
Brief Description:
IDCoL has received the approval of the funding proposal for
its programme titled "Promoting private sector investment
through large-scale adoption of energy-saving technologies
and equipment for Textile and Readymade Garment sectors
of Bangladesh".
As the garment sector accounts for the highest CO2
emissions at 15%, while textile comes next with 12.4%, the
fund is be expected to be of great help to effectively address
the needs of the sectors.
Total Programme
Size
U$423.50 Mn
Financing from
IDCoL, Local
financiers and
project sponsors
Concessional loan
from GCF,
Tenure 20 years
Grace Period 5
years
U$256 Mn
U$167.50 Mn
U$100 Mn U$156 Mn
Textile RMG
Investment in
building energy
efficient
technology
IDCoL:
Green Climate Fund

32. 32
Implementing Agency: International Finance Corporation
Investment: U$ 44 Million
Brief Description:
▪ IFC led Advisory Partnership for Cleaner Textile (PaCT) is
a holistic program that support the entire textile value
chain – spinning, weaving, wet processing and garment
factories in adopting Cleaner Production (CP) practices.
▪ The programme engages with brands, technology
suppliers, industrial associations, financial institutions,
government to bring about systemic and positive
environmental change for the Bangladesh textile sector
and contribute to the sector’s long-term competitiveness
and environmental sustainability..
PaCT has reached to 338 RMG factories in Bangladesh,
trained 6,641 personnel through 399 training sessions and
resulted in the following impacts (cumulative).
IFC
Partnership for Cleaner Textile (PaCT) Project

33. 33
Source: PACT Program, IFC
Cost savings can make the project commercially viable – Abatement Curves
Benefits of using better technology over mainstream production stack over a time period

34. 34
IFC
Investments in Organizations; Chaldal and Truck Lagbe
Chaldal: Chaldal is an on-demand grocery delivery service that provides a
wide range of products to its users in Dhaka – Groceries, Fresh Produce,
Diapers, Cleaning Supplies etc. The company uses an inventory-based
model and has 13 warehouses.
IFC Funding:
• IFC invested $3 Mn in Chaldal to help the company continue to expand
and generate 2,000 jobs —mostly of them for low-skilled workers who
often struggle to find jobs in the formal sector.
• IFC’s funding aims to improve the viability of venture investing in
Bangladesh—ultimately attracting additional capital to the market.
Truck Lagbe: Truck Lagbe is leveraging technology to optimize trucking
logistics. Customers place shipping orders on the platform, and truck drivers
bid for trips through an online auction conducted in minutes.
IFC Funding:
• IFC is investing $3 Mn in Truck Lagbe to support the expansion of the
Company in the domestic market along with the introduction of ancillary
services for partners.
• The business plans to aggregate the platform and improve feasibility of
usage for the consumers,

35. 35
SmartCap
Accelerating SMEs
Background: SmartCap stands for smart capital. The program works with
SMEs that carry immense growth prospects but lack financial accessibility
and business know-how. By weaving four vital components together –
business pedagogy, market connections, financing & technology –
SmartCap inspires SMEs to thrive and grow. LCP in partnership with
Syngenta Foundation, VIPB, Meghna Bank Ltd. And Southeast Bank Ltd., is
escalating this program.
Impact:
• Capacity Development (Business Management + Investor Readiness)
• Agri Technology (Seedling + Mechanization)
• Forward Market Linkage
Ambition:
• Grow the Money Plus Plus model as an effective tool for MSE growth in
Bangladesh
• Leverage Impact Fund up to USD 20 million over 3 years and develop
300+ Farmers’ Hub all over Bangladesh
Video Link: https://www.lightcastlebd.com/accelerator
SmartCap received Special Mention Award at BFP-B

36. 36
Startup Bangladesh Limited
“Shoto Borshe Shoto Asha Fund”
Background: Startup Bangladesh Limited is the flagship venture capital
fund of ICT Ministry. the first and only venture capital fund sponsored by the
government of the people’s republic of Bangladesh started its journey on
March 2020 with an allocated capital of BDT 500 crores.
Key Features:
• SBL signed investment agreement with 7 startups investing an
aggregate of $2 Mn+.
• The Fund provides investment in the form of equity, convertible debt
and/or grants in pre-seed, seed and growth stage startups. It would
invest thru co-investments, as a fund-of-funds and asset manager and
provide other in-kind supports to startups and stakeholders.
• It will support technology-based innovations to create new employment
opportunities, promote under-represented tech groups, foster
entrepreneurship culture and bring transformational changes to lives of
millions.
Ambition:
• Aims to invest BDT 100 Cr ($12Mn) in 50 startups by 2021.
• Catalyze the way forward of creating Digital Bangladesh.
Portfolio

37. 37
Background: The OXFAM ‘Empowering Youth for Work
(EYW)’ project aims to have a lasting impact on young rural
people: increased employment, reduced vulnerability to
climatic risks, improved sexual and reproductive health rights
and increased influence and participation in decision-
making.
Key Features:
▪ LCP designed and deployed a quasi-equity instrument
that would help generate greater impact and social
returns for 15 promising impact enterprises across
Khulna and Rajshahi.
▪ The introduction of the fund aims to create a new and
innovative financing channel for SMEs that are in need
of financing but are either not willing to or are not able to
acquire a direct bank/equity loan.
▪ LCP targets that through this fund's recipients will be
able to increase financial inclusion in the economy and
thus promote financial stability and sustainable
economic growth – which aligns with EYW’s goals.
Empowering Youth for Work
Blended Capital Facility for supporting SGBs by Oxfam and LightCastle

38. 38
Background
In March 2020, a catalytic fund named Biniyog Briddhi was launched in
Bangladesh powered by the Swiss Agency for Development and Cooperation
(SDC) and Roots of Impact (ROI). The fund aims to both train, finance and
advocate impact investors and enterprises through Impact Ready Matching
Fund (IRMF up to USD 100 thousand) and Social Impact Incentives (SIINC up
to USD 250 thousand). The programme is built around three pillars.
Capacity Building
• Initially, incubators, accelerators and impact entrepreneurs receive targeted
capacity building in order to pro mote investment readiness (IR) and
strengthen impact management (IM).
• Train the trainer programmes for service providers and vouchers for impact
entrepreneurs aim to bring these capacities to the next level.
Catalytic Funding
• Impact entrepreneurs and investors can benefit from more suitable and
attractive forms of capital by using catalytic finance that attracts additional
investment.
• In addition, entrepreneurs are incentivized to manage their impact, which
will create more transparency and engagement from business angels to
invest.
Advocacy
• Policymakers and advocates receive fresh ideas on how to create a more
favorable framework for social and ecological innovation and mobilize
more capital for the benefit of impact entrepreneurs.
Biniyog Briddhi
Scaling Impact Enterprises of Bangladesh

39. Email: bijon.islam@lightcastlebd.com
Mobile: +88 01747 353438
Web: www.lightcastlebd.com
Thank You