Commissioned by the Indonesia Impact Alliance (IIA), The Social Investment Consultancy (TSIC), together with its partner, and with research support from Kois Invest, conducted a landscape study on the impact investing market in Indonesia over the last few months.

The team facilitated an interactive workshop with more than 60 participants consisting of investors, start-up entrepreneurs, philanthropists, policy makers, and ecosystem builders that included sharing some findings on the barriers faced by impact-oriented Small and Medium Enterprises in Indonesia and exploring possible solutions to lift the potential of the impact investing market in Indonesia to contribute to the country’s Sustainable Development Goals. 

A few takeaways from the workshop:

• There is a mismatch in funding demand and supply. Available funding sizes and structures don’t align with needs, especially for those falling within the range of USD 100,000 to USD 1 million. Enterprises also struggle to find suitable investors or articulate their requirements. There are also misaligned expectations around financial returns and risks. 

• In emerging sectors such as climate and market segments with persistent capital gaps and perceived higher financial risk, such as segments of the SME market, there is a continuing need from asset owners for some level of capital protection. Blended finance structures can be a solution and the challenge is identifying the sources of patient, flexible capital to undergird such structures and crowd-in a potential emerging ecosystem of private impact investors. 

• Challenges with impact measurement. Enterprises lack expertise and resources to measure impact, making it hard for investors to assess their effectiveness. 

• There is a strong need to build capabilities of both the impact enterprises and fund managers, and there needs to be structures in place to nurture a consistent pipeline of talent. There are already locally tailored solutions and stakeholders available, and the IIA can be a strategic platform for this initiative.

As we continue to navigate the complexities of Indonesia’s impact investing landscape, the insights garnered from this study and workshop pave the way for collaborative efforts to unlock the full potential of impact enterprises, driving sustainable development and creating a more inclusive economic future.