Impact-Linked Loans
Impact-Linked Loans are an innovative financial instrument offered by the Impact-Linked Fund for WASH. These loans enable water and sanitation enterprises to scale and increase their impact by providing “better terms for better impact”.
In essence, Impact-Linked Loans are similar to uncollateralised SME loans. The main difference is that the Impact-Linked Loan’s interest rate and principal repayment depend on the borrower’s achievement of pre-defined impact goals. Hence, the higher the impact achieved, the lower the interest to be paid (impact discount). Next to this, if any pre-agreed impact is achieved over the loan period, part of the principal can be forgiven.
Tailor-made lending solutions that promote impact
Aqua for All developed the Impact-Linked Loans putting impact businesses at the centre. The specific terms, including the possible interest rate discount and partial reduction of principal, are agreed with applicants on a case-by-case basis. Therefore, the Impact-Linked Loan’s terms vary from borrower to borrower.
Impact-Linked Loans are funded by Aqua for All and hosted by the Dutch foundation Impact-Linked Finance Fund (ILFF).
Which enterprises are eligible for an Impact-Linked Loan?
Eligible enterprises must provide solutions to water, sanitation and hygiene challenges in either Eastern or Southern Africa. They can have any legal form but must be at a growth stage of development. This means they should have a defined product offer, a base of paying customers and a business track record of at least 3+ years.
Eligible enterprises must possess financial stability by having achieved break-even/ profitability or are underway to achieve them in the short-term. The enterprises should prove their financial capacity to repay the loan as well as their track record on delivering impact through an established impact measurement system.
For more information, please read the FAQ.
What is the difference between Impact-Linked Loans and Social-Impact Incentives (SIINC)?
There are three main differences between Impact-Linked Loans and SIINC.
- Impact-Linked Loans require (partial) loan repayment while SIINC provide non-repayable incentives.
- Impact-Linked Loans are fully disbursed at the beginning of the loan period, whereas SIINC are paid periodically based on verified impact generated.
- To qualify for receiving SIINC, an impact enterprise must be able to raise repayable investments. This is not required to receive an Impact-Linked Loan.