Tracking reach to the base of the pyramid through impact investing

Publication by UK Aid’s Impact Programme

A key objective of the DFID Impact Programme is to track and report the number of poor people who benefit from the impact investments that are made in businesses in Sub-Saharan Africa and South Asia through the DFID Impact Fund, managed by CDC. Understanding numbers reached is only one component of social impact – depth of impact, catalytic change, negative impacts, cannot be ignored. But simply assessing the numbers reached throws up a host of challenges including who counts as poor, who counts as a beneficiary, what definitions and assumptions are to be used. The task has thrown into sharp relief the diversity and lack of clarity on beneficiary reporting across the development and investment arenas.

This paper shares discussion on assumptions and definitions that are needed to track benefits to low-income people resulting from impact investment. The material in this paper has been used to develop the DFID Impact Fund Results Framework. It is shared not only to make the analysis available and useful to others facing similar challenges, but also to seek feedback and further input from others in the field. We have not found a ready-made system for the Base of the Pyramid (BoP) tracking used by another organisation that we can adopt wholesale, but we have found that every time information on what others do is shared, we make steps forward.

The paper first clarifies the pathways by which the DFID Impact Fund investments will benefit low-income people as consumers, suppliers, employees and entrepreneurs and summarises the DFID Impact Programme. The paper then tackles two main challenges in tracking those beneficiaries:

  • The first challenge, covered in Section 3, is to define who counts as low-income or at the BoP. The various definitions in use by various market players are summarised.
  • The second challenge, covered in Section 4, is to define who counts as a beneficiary. This apparently simple question depends on defining types of participation, household multipliers, timing of benefit and much else, as reviewed in Section 4.

The approach of the DFID Impact Programme in relation to definitions and assumptions used is outlined briefly. However, the paper does not provide a discussion of methodologies for actually assessing the reach and significance of impacts at the BoP, which is a vast and important but separate topic. We conclude in Section 5 with a brief reflection on the agenda moving forward.

The total report can be found here.