How to close the financing gap for emerging-economy ventures

Nine in 10 (89%) impact assets under management now target market-rate returns, according to the Global Impact Investing Network's 2025 State of the Market survey, the largest self-reported dataset the industry has. Only 2% target anything below market rate.

Blended finance, i.e. mixing donor or grant money with commercial capital to make a risky deal investable, was supposed to be the mechanism that kept impact capital exposed to first-loss risk, while commercial capital followed once that risk was priced down.

Convergence analysis from 2025 amplified that conclusion: impact investing resembles traditional commercial investing chasing market returns. Two developments drove this change.

First of all, the economics of debt push ticket sizes up. Many impact funds are moving from equity towards debt because it offers greater predictability around liquidity and returns. With equity, capital can remain tied up in a company for years while investors wait for an acquisition, sale or public listing. Debt, by contrast, provides scheduled repayments and a clearer path to capital recovery.

But debt changes the maths on who qualifies. Underwrite an 8% annual return instead of a 3x payout, and your due diligence costs must be earned back against a much thinner margin, so a ticket size that used to be $300,000 becomes $2 million and up. This means only large, already-profitable organizations make the cut. Any single fund making that call is behaving rationally. But an entire capital market making the same call, one reasonable decision at a time, ends up avoiding exactly the stage it was built to fund.

Secondly, the industry is moving as a herd: converging when the market needs them to diverge. Individual institutions may have good reasons for tightening their investment criteria. The problem arises when many of them move in the same direction at once.

Using investment capital for social purpose is not new: foundations were experimenting with programme-related investments as far back as the 1960s, using loans, guarantees and equity alongside grants, without necessarily seeking market-rate returns. What changed in the 2000s was the emergence of impact investing as a much broader investment market, explicitly combining social or environmental impact with financial returns.

That expansion brought new pools of capital into the sector, but it also brought impact investing closer to the structures and expectations of conventional investment markets. Somewhere in that move, the mindset shifted too, from "what does this system need" to "what return do I need". There is nothing inherently wrong with either question. The problem is when too many investors end up asking the second one on the same terms.

The consequence for emerging economies is that the retreat lands hardest exactly where it shouldn't.

For example, in East Africa, Dalberg and Aceli Africa's benchmarking of agri-SME lending found risk running at least twice as high as other sectors, with returns 4-5 percentage points lower. Put a profitability gate in front of that risk-return profile and you exclude most of the sector before the conversation starts.

Their measured financing gap: $65 billion a year across Sub-Saharan Africa, with three in four agri-SMEs stuck in a “missing middle” – too large for microfinance, not yet bankable to commercial banks. It is the same gap described in ticket-size terms above, just measured at the level of an entire market instead of a single deal.

And the timing compounds it: USAID was dismantled in 2025 and development assistance is shrinking more broadly, exactly as impact capital pulls back its own risk appetite. The pattern is not unique to East Africa.

But the finance side is not the only place the intention has drifted from the instrument. Venture builders and founders share responsibility for a mismatch of their own: too many ventures have been designed and pitched as if they were software. However, many of them are operational, infrastructure-heavy businesses whose trust, coordination and market dynamics do not compress on a traditional closed-end venture capital fund timeline.

Under capital scarcity, lean-startup discipline becomes more relevant, but only if you ask a different question than Silicon Valley does. Not just “does the product work?” but “does this venture strengthen or strain the system around it?” Sometimes the strategic move is deepening coordination or trust infrastructure before chasing growth. That looks slow by conventional standards, but it's also the more resilient path.

In 2022, for example, Dietplastik launched reuse in Indonesia together with the Plastic Solutions Fund. Instead of pushing individual ventures toward growth, the ecosystem around them was built in parallel to move policy, practice and capital in sync.

But coordination alone does not close the financing gap. The harder question is what happens when a venture in an emerging economy is making progress but doesn’t fit neatly into the terms of a conventional investment round?

That requires genuine co-creation between the people designing ventures and the people financing them: a shared understanding of what the business needs now, what risks remain, and what needs to be true for the next form of capital to become possible. In other words, capital should flow as a continuum, not a single gate.

In Colombia, Acumen's portfolio company Siembra Viva was working with smallholder farmers, for whom market access was a constraint. Acumen responded by helping connect the company with major buyers, including Crepes & Waffles and Éxito, which subsequently became customers and helped Siembra Viva reach financial breakeven.

What matters here is the logic behind it: the investor looked beyond the company’s balance sheet to understand what was holding the model back. Capital was part of the answer, but so were relationships, market access and coordination.

Financing strategy needs to be designed alongside venture strategy. That means thinking about the full finance journey a resilient venture would need:

Liquidity needs to flow between each of those stages, underwritten by investors and founders who agree in advance on what "ready for the next stage" looks like, instead of every actor waiting at the same profitability finish line for someone else to have derisked it first.

In practice, closing the gap between what emerging economy ventures actually need and what the current capital market provides requires four things:

Shifting mindsets and systems takes time, but there is step investors can take: before the next term sheet, sit down with a prospective investee and ask how the instrument itself could flex to fit them, not just how they should adapt to fit the instrument already built. This is where more adaptive capital starts.