The Egyptian-American Enterprise Fund

Using Impact Measurement and Management to Understand Social and Economic Impact

The Egyptian-American Enterprise Fund (EAEF) invests in private enterprises in Egypt that contribute to long-term, inclusive and sustainable economic growth. The enterprise fund deploys capital with the dual mandate to deliver financial returns and promote socio-economic development in Egypt. From 2013 through 2019, EAEF has supported close to 5,000 jobs, seeded one of Egypt’s leading private equity funds, Lorax Capital Partners, invested over $200 million in seven companies and three funds, and attracted an additional $311 million in foreign direct investment (FDI). EAEF has also helped more than 140,000 small and-medium-sized enterprises (SMEs) grow their businesses.

In May 2011, less than six months after anti-government demonstrations erupted across the Middle East and North Africa as part of the Arab Spring, the U.S. government announced that it would seek authority to create two new enterprise funds in Egypt and Tunisia. In 2011, the U.S. Congress authorized the creation of EAEF as a private corporation with up to $300 million to promote the development and reform of Egypt’s private sector.

What is an enterprise fund? The enterprise fund model was created following the collapse of the former Soviet Union to support newly independent states in their transition from centrally-planned to market-based economies. USAID provides seed capital for enterprise funds, which facilitate economic growth by making investments in a diverse array of businesses. In 2011, the Arab Spring sparked renewed interest in applying the enterprise fund model to the MENA region for countries experiencing political and economic transitions.

In Egypt, only one in three adults have a bank account. Given the importance of financial inclusion to alleviating poverty and improving economic development, EAEF’s first invested in Fawry, Egypt’s largest electronic payments network, and Sarwa Capital, a pioneer of consumer and structured finance solutions—two companies focusing on products enabling financial inclusion. The fund has since expanded its portfolio to include sectors that improve Egyptians’ access to vital social services, such as healthcare and education.

From driving economic growth to spurring innovation, investing in education develops the human capital needed to end extreme poverty. One-third of Egypt’s population is under the age of 15, and the country currently lacks the infrastructure, teacher supply, and training necessary to support its students. Egypt’s current youth population also suffers from high unemployment, which plagues young women even more: 30 percent of youth and 49.8 percent of young women are unemployed. Promoting entrepreneurship and growing SMEs as sources of job creation can help reduce unemployment.

One example of how EAEF’s investments are working to address this is Flat6Labs Cairo, an affiliate of Flat6Labs, which is a regional startup accelerator that provides seed funding, entrepreneurship-focused business training and strategic mentorship for its startups. As young, innovative entrepreneurs continue to be excluded from traditional financing networks, especially female entrepreneurs, organizations like Flat6Labs Cairo are critical to supporting founders tackling problems across sectors in Egypt. In fact, Flat6Labs Cairo businesses have created a total of 400 jobs so far, of which 31% are female founders and employees, and 97% are youth between the ages of 19 and 35.

“EAEF attends all our events, speaks to ecosystem partners about our work, advocates for us with all the big players and is always responsive,” says Marie-Therese Fam, managing partner, Flat6Labs Cairo. “This is critical as we work together to seed the entrepreneurial ecosystem in Egypt.”

Getting Started With Assessing Social Impact

EAEF had been making investments since 2013, and while they had robust financial analysis procedures, they had yet to do a comprehensive analysis of the social impact they were creating in Egypt. Their Chairman, James A. Harmon, was familiar with the growing impact investing industry and knew that a thorough impact analysis needed to be done to demonstrate to the U.S. Congress and the private sector EAEF’s progress to date. He tasked Cornelius “Connie” Queen who had joined EAEF that same year, with exploring the best way to approach it.

Connie rolled up his sleeves and performed a deep dive into impact investing and management. He attended conferences and webinars, completed an Acumen social impact analysis course, spoke with numerous professionals in the field, and read impact measurement and management (IMM) literature from industry leaders such as Bridges, Impact Management Project, and others. From there, Connie delivered a memorandum to EAFE’s Board and Chairman outlining the state of the impact investing industry, IMM best practices, and a series of short and medium-term recommendations to strengthen EAEF’s IMM capabilities.

USAID oversees EAEF with an M&E evaluation plan, so going into this work EAEF already had a theory of change, which is a tremendous head start for a firm new to IMM. While the theory of change was well thought out, EAEF wanted the opportunity to review it and better align the document with the impact they were having in Egypt after several years of investments.

As part of his deep dive into the impact industry Connie built on the existing USAID M&E plan to include a series of indicators and metrics from the Global Impact Investing Network’s (GIIN) IRIS+ impact accounting system. This allowed EAEF to not only capture USAID mandated indicators but to broaden the scope of its measurement by including additional impact metrics it had not previously considered. It also helped EAEF’s fund managers and investees strengthen the management of their companies by measuring metrics related to their social and financial impact. 

After collecting data on fund managers and portfolio companies from the baseline of investment through mid-2019, Connie realized that an impact report would offer a great opportunity to describe EAEF’s progress to date to public and private stakeholders, including impact investors. At the same time, he knew that EAEF would need an outside consultant to really make sure EAEF crafted a robust impact report that followed industry best practices. After speaking with several colleagues in the impact space, a fellow alum from the Tufts Fletcher School of Law and Diplomacy now working at Nuveen, for whom PCV worked on their Farmland Sustainability Report, introduced Connie to the team at Pacific Community Ventures.

Reporting on Impact

EAEF’s main goal in working with PCV was to develop an inaugural impact report. EAEF wanted to demonstrate the impact enterprise funds can have in supporting socioeconomic and private sector development, as well as EAEF’s own progress in Egypt. The EAEF and PCV teams met to align on goals together, the timeline for the work, and to review the key internal and external players and stakeholders. Once there was alignment, PCV’s team started digging into their own research: evaluating data sets, understanding EAEF’s work and the context in which they operate, reviewing the market in Egypt, and building an understanding of how other enterprise funds have operated. Then PCV interviewed EAEF Board members, staff, and investees in Cairo; EAEF also supported this primary research by conducting several interviews in Cairo.

PCV wanted to know how these key stakeholders thought the report should be framed, what should be featured, and what value they saw in EAEF as a partner. Connie said, “It was especially educative with our investees, because there’s been a stigma on data collection in some emerging economies. I saw my role in this as an educating our stakeholders on the importance of impact measurement and management.

PCV pulled the materials into a memo that outlined what was possible to report on in the inaugural impact report and what would need to be built out to work on down the road, including the impact data needed. PCV also agreed to update EAEF’s theory of change to show their pathway to economic development in Egypt. Then the team outlined the report itself. The last thing PCV did was put together future reporting recommendations for EAEF so they could make sure they had the internal processes in place to capture and report on those things.

Once the analysis was complete, PCV worked with EAEF to draft and design their impact report. The arc of the inaugural impact report shows EAEF’s approach to rebuilding Egypt’s private sector by seeding new private equity and venture capital funds, investing in sectors critical to Egypt’s economic development, such as financial inclusion, and increasing access to finance for SMEs . As they’ve seen returns on financial and social investments, EAEF’s portfolio has expanded to include additional access to vital services for Egyptians (education, healthcare, and agriculture).

“It was helpful working with PCV to get into the weeds of the different dimensions of EAEF’s impact while framing it in the context of IMM best practices,” Connie said. “PCV helped us articulate the impact of seeding Lorax as our investment advisor and ultimately creating a leading private equity fund in Egypt. PCV was important in helping us tell the story of our first seven years in Egypt and our pathway for economic development by examining the work of our investees in several case studies and improving our theory of change. Putting everything on paper and articulating the investment strategy for the fund was very helpful too.”

The team at PCV also learned a lot by working with Connie. “This project was unique in that we had to contextualize work our IMM practices in a frontier market,” said PCV’s Kristy Henrich. “We had to regularly grapple with our own western ideas of impact, and the notion that impact is in the ‘eye of the beholder’.”

Impact Management Is Built Into Their Future

Connie said that for him personally, he wanted to help embed a culture of impact within EAEF’s staff, investees, and fund managers. Publishing an inaugural impact report was an important first step, and PCV’s assessment and recommendation memos helped surface other insights, such as including certain metrics in shareholder investment agreements to better chronicle impact in the future. “It’s important to keep educating investees too so that they see the importance and value of aligning impact and financial success. We have to prevent against impact washing, and the more familiar folks are with these terms like ‘IMM’ the more constructive a dialogue we can have. Our investment managers are advancing our strategy, and it is important that our impact goals are aligned and based on industry best practices.”

In 2020 and beyond, EAEF is focused on strengthening their IMM processes. They want to recalibrate their impact management system based on their experience doing the inaugural impact report with PCV. Their second priority now is thinking through how EAEF as public-private impact fund can help fulfill the main objectives of the impact investing industry and support efforts to harmonize impact management.

From PCV’s side, the team loved being part of a project where every investee speaks to some value that was added to their work by the client. Dawi Clinics’ CEO, Magda Habib, said EAEF put two women on their Board, which was tremendous as these women have provided intros to female leaders in the international healthcare system. This has increased their access to capital and expanded their networks – two methods for advancing inclusion, which is a goal on which PCV and EAEF are aligned.

“Enterprise funds have the ability to help facilitate economic growth in emerging and frontier markets by harnessing the private sector, and in doing so can create jobs and shared economic growth,” said Henrich. Enterprise funds represent a sustainable economic development model which can also promote international cooperation. “EAEF’s work infusing capital and resources has continued to create opportunity for the development and expansion of vital products and services for the Egyptian people.”