East Africa is quite active and growing impact investment market, according to Abhilash Mudaliar, Research Manager at Global Impact Investing Network (GIIN).

The latest study from GIIN and Open Capital Advisors has revealed that more than $9.3bn has been disbursed in the East Africa region by impact investors.

“At the country level we have observed that the volume of the activity as well as opportunities and challenges do vary from one country to the next. Some of the prominent countries to date include Kenya, Uganda and Tanzania,” Mudaliar told Africa Global Funds.

According to the Landscape for Impact Investing in East Africa report, development finance institutions (DFIs) account for more than 85% of impact investments ($7.9bn) in the region.

Non-DFI impact investors, which include VC/PE funds, foundations, family offices, commercial banks, and angel investor networks, have deployed over $1.4bn to date in the region through more than 550 deals.

Mudaliar said that impact investors have been investing across the range of different sectors, from financial services to agriculture and healthcare.

“Investors do see opportunities across the range of different sectors. The most prominent ones include agriculture, renewable energy, and distribution of basic services such as education, healthcare and water and sanitation,” he said.

In total, 155 impact investors currently manage 203 active investment vehicles in the region, and many more are considering the region for future commitments.

Almost half of the $9.3bn in impact capital disbursed in East Africa has been in Kenya—more than triple the amount deployed in each of Uganda and Tanzania.

According to the findings, impact investors are actively looking for deals in the region’s fast-growing second-tier cities, highlighting opportunities in agricultural aggregation, renewable energy, and mass market consumer goods.

“Kenya acts as a major hub for impact investing in the region and there are opportunities for impact investors to diversify away by looking at opportunities in rural areas, in other countries to be able to identify other investment–ready ventures,” said Mudaliar.

After Kenya, Uganda is the second most active country in East Africa’s impact investing landscape, attracting approximately 13% of capital disbursed by impact investors.

Despite having the largest economy in the region (in PPP terms), Ethiopia has received only around 7% of disbursements to date.

Rwanda, with an economy just one-eighth the size of Ethiopia’s, has received half as much impact capital, or 4% of all disbursements in the region.

Notably, the research team was unable to find any evidence of impact investment activity in Eritrea or Somalia, and only minimal activity in Burundi, Sudan, South Sudan and Djibouti.

Mudaliar noted that the challenges in these countries relate to the macroeconomic environment: “Political and economic stability have been deterrent to foreign investors putting money into these markets.”

“The common challenge that was identified by interviewees across the region was identifying suitable investment opportunities. A lot of the businesses in East Africa, especially SMEs, don’t have the degree of business systems and business plans that investors typically look for,” said Mudaliar.

Commenting on the exit environment, Mudaliar said: “Most of the funds operating in East Africa are still fairly early in their investment lifecycle, so the opportunity to exit has not really arisen yet and this will develop over time.”

Going forward, Mudaliar expects to see greater and expanded presence of investors in the region: “As the industry matures locally, we may see investors developing sector-specific funds or sector specific investment strategies.”

“It’s also likely that in the coming years, East Africa will develop a stronger ecosystem – various type of organizations that support both impact investors and social enterprises to try and help channel capital between investors and investees – to help facilitate more effective flow of capital,” he added.

The study was produced with support from UK aid from the UK Government through the Department for International Development’s Impact Programme.

Future GIIN impact investing landscaping reports are planned for the regions of West and Southern Africa.