Hivos was funded in 1968 inspired by humanist values. 50 years later, Hivos is active in 43 Countries in Africa, Southeast Asia and Latin America, holding 4 regional hubs and 6 country offices, working with 445 partner organisations. Hivos has now 384 employees (137 in the Netherlands) and achieve a total income of € 127.9 million. Can you explain us the origins and the evolutions of Hivos during the years?
Edwin Huizing. We are a typical product of the end of 60s: at that time many kind of development organizations and foundations were created in the Netherlands, often according to religions or strong identities, such as catholic, protestant, social democratic or inspired by humanistic values.
Always inspired by humanism, today we have been operating for 50 years. We really focus on human rights, social justice, people empowerment, women empowerment, in the perspective that people can develop themselves. Right from the beginning we have provided all kind of services to enable and empower people so that they can develop their potential in their communities, and that’s why Hivos works with a wide range of stakeholders and co-creates solutions with civil society partners. This is our approach, we strive for a pluralist society, in which people are capable to take initiative and make something out of their lives in the community. We respect diversity and were among the first who talked about women empowerment 40 years ago and over 30 years ago we started promoting the rights of the gay population in Africa, Asia and Latin America. Hivos believes in Integration through Training, and through these programs we want to give these people a voice, and that’s what we still do, seeking for solutions created by people taking their lives into their own hands.
Your approach to social change is based on three steps: 1. Supporting frontrunners and develop ideas, 2. Connecting multiple stakeholders and co-create solutions; 3. Influencing policies and scaling solutions. Can you illustrate this strategy and how did you choose it?
Edwin Huizing. We started to focus on creating a powerful and thriving civil society in the countries where we were operating, but we soon discovered that in many of these countries there wasn’t a strong civil society, so we decided to involve people who raised their hands up and took personal risks to address social issues neglected at that time. We helped create an enabling environment, including the political environment, in which these solutions really had a chance to flourish. In Africa, for example, in 70s 80s 90s there were a lot of dictators… The only solution was to look for activists or for people with great ideas, new solutions and courage. We call them frontrunners and asked them to join us to build a community who wants to change the mainstream mentality. We don’t target only organizations with a specific identity: sometimes there can be a group of farmers, opposing the common industrial approach to food and searching for an equal economy and a sustainable food system… these people are already driving the change, we only help them name their efforts, help to develop smart ideas and new approaches. We support their most promising solutions and bring them to scale. The world today faces still big problems but in a more complex system: countries are interconnected and interdependent due to globalization, and you need to get together to find solutions that really work. We call it multi-actor initiatives, that require a long-term commitment from the participants in order to have real impact. In the past ten years we tried to influence policies to gain solutions together with several actors, with the aim of creating joint impact to address complex problems. It’s something we learnt by doing: we need to collaborate with other NGOs, private sector, civil society and certainly also with governments so that they can get out the request of civil society. This is something we include and investigate more and more in our programs.
Hivos provides grants to partners and projects, and experiments with other financing mechanisms such as crowdfunding and impact investing. Which are the main benefits to support the social sector by providing not only grants?
Edwin Huizing. Starting from early 90s we have been investing in micro finance, because we don’t believe grants are the only solution: sometimes loans are more important. We set up the Hivos Triodos Fund (HTF), a separate foundation, to experiment loans and/or equity investment from the Hivos Triodos Fund, often in local currency, putting the basis to grow in crowdfunding and impact investments sector.
Jaap Spreeuwenberg. The main insight is that change can be done by entrepreneurs. Hivos sees entrepreneurial people of all ages as frontrunners for change and supports them as change agents who can reduce poverty, foster sustainable use of natural resources and reduce social inequalities. The problem is about the relationship to establish with them not to disturb the market: if you want a market where entrepreneurs can thrive in a healthy financial equal system, the first question should always be how to make a loyal equity instead of grants. I think from a broader perspective it is interesting to offer different kinds of capital as private families can enjoy the fields and also make positive financial return. In fact the tools in our toolbox include different types of funding you can employ to reach shorter impact. Banking capital is interesting because you can keep it to yourself in a strong perspective, to reinvest it, or let the capital we have at hand to make the change. People want to see bigger: what I personally really like about making equity investment in organizations instead of big grants is that you get different kinds of partnership in a way far more equal than giving a grant. You really grow together in the company, and if everything works well with the entrepreneurs you obtain a long-term relationship, enforce the strategy of the organization and get a real growth. It’s a content-type relationship instead of only financial.
Hivos owns the independent company Hivos Impact Investments that invest in early-stage companies that are scalable on both finance and impact. Which is the reason to create a different legal structure for impact investing? Can you explain us its origins and evolutions?
Edwin Huizing. We created a legal structure aside from the foundation for two main reasons. The first is that if you move from ground management to money investment you need other type of people, in order to bring the size and structure of the organization into line with the new requirements. The second is that we needed experienced risk management staff, someone who makes sure that if something happens to the company or things simply turn bad, this hasn’t large effect on the foundation as a whole. The collaboration with Triodos Bank is very important to meet this challenges. Hivos decided it was time to rethink its involvement in impact investing and microfinance, and that required different instruments.
Jaap Spreeuwenberg. It seems that it suits better for us to be a for profit entity than a foundation also towards commercial investors in the field, because when you invest money on entrepreneurs that hopefully should make a profit, being a different company is seen as a plus. You need to be what you want to see in others. We are an independent impact investment management company owned by Hivos, so we have the flexibility of a start up together with all the network and expertise of a big brand. We are part of a big family and our relationship is quite similar to the one I maintain with my real family: sometimes I’m only Jaap, I’m independent and I don’t care about what my family thinks, but in such circumstances such as Christmas, or when I’m in need I call back the family, I’m still part of it. It’s the same with Hivos: all the investments Hivos makes in Africa to combine different entity are aligned with the philosophy of the Hivos Foundation. Africa has an enormous potential, and this is a strategic moment to prove our efficiency and also to streamline our organizations because we make quite small investment from €50.000 to half a million, so the challenge for us is to keep the transaction go slow and build our network and team on the ground in the south, slowly shifting responsibility of team member from The Hague to the countries where we actually operate.
Hivos Impact Investments runs two private equity impact funds to create both positive impact and financial return, managing: 1. Hivos Food & Lifestyle Fund, aimed at food companies in Southern Africa; 2. Hivos Mideast Creative Fund. How did you select these topics and these geographical areas? Where do you invest in and how they work?
Jaap Spreeuwenberg. The first question to be answered is «where has Hivos the strongest track record»? For a number of years now, Hivos has focused on promoting local grant-making capacity through funds for small civil society initiatives. Where we have a good network and there are market opportunities to invest our money in good companies, programs tend to be stronger; on the other hand, things can turn out well also where there is a lack in the market. For example, we chose to focus on Southern Africa instead of Eastern Africa: in Eastern Africa there are already a lot of impact investment organizations chasing relatively few companies, so the market is quite crowded. As a result, I would say that Hivos network and programs in East Africa are stronger than in Southern Africa, but in Southern Africa there are no players, so the impact we can determine with our investment is relatively big: our efforts are lead to invest for change in preventing (further) soil depletion, providing more diverse and healthy diets and prevent food waste; we are the first foreign investor in Zimbabwe, so we can make a huge difference. Now investors want to look into investment’s room, so it’s quite interesting to choose Southern Africa instead of East Africa. We’ve just opened a front there, it’s a combination of track record and strength of big Hivos Foundation, a opportunity to invest our money and to attract investors together with the different we make on the ground impact wise.
At the moment we have also an Italian investor: Cesvi, and we’d like to open to new Italian investors.
How do you measure the social impact of the initiatives supported both with grants and with impact investing?
Jaap Spreeuwenberg. We have been committed to a long measurement process together with our consultants and people from the foundation and also the entrepreneurs we support, and we are quite proud of the results. We do measure the impact we actually determine, but don’t turn the company we are investing in into a sort of bureaucracy. The first step is looking at the change we make in health: we want people to eat better and healthier food, food produced locally, and thus create job locally. We translate the changes into 6 Sustainable Development Goals that are particularly relevant for Hivos, then we ask sub entities and everyone involved which are the elements to be measured, or those you were bond to know from an entrepreneurial perspective. All this work resulted in 40 indicators to assess if a certain entrepreneur fits the criteria before making the investment. If he or she is suitable, we sit together to arrange an agreement they report on; those indicators are translated into our system and then the system itself sends out a quarterly questionnaire for the entrepreneur to fill in. All key indicators concern the impact and the appropriateness of the company, but also the progress the field is making on a quarterly basis, in order to measure, for example, how many jobs are created for female staff, or if a certain product, such as organic rooibos, has a positive effect on health, how much the production increases. We basically add all those numbers to balance.