A Systematic Review of Literature on Impact Finance: A Communication Perspective

Abstract

Impact financing has become an important method of financing social projects, especially for small enterprises, as they have limited access to regular financing mechanisms. Business projects with attached social benefits or sustainable elements are normally eligible for impact funding. Government policies and market dynamics also influence whether an investor opts for impact financing or traditional financing. Considering these aspects, a review of the status of research in this area was conducted. A search of Google Scholar and screening and selecting using PRISMA flow led to the final selection of 31 papers. The salient points from these 31 papers were presented and discussed. Most papers (21 out of 31) dealt with applications of impact financing in different countries and contexts. Six papers dealt with types and methods of impact financing. Only one paper dealt with mechanisms of impact financing. Three papers dealt with policy effects. The large potential for the application of impact financing in a wide range of contexts was evident from the fact that most papers (21) dealt with this aspect. These applications ranged from using impact financing to achieve MDG goals to achieving specific social benefits in areas like agriculture, energy, healthcare, conservation of natural resources, and climate change. Although mostly small entrepreneurs, who have limited access to financial resources are most benefitted by impact financing, mega projects like the Tehran Sewage project were also financed by impact funding. Very often, government policies facilitate impact financing by framing rules on tax, green certificates, and subsidies. There are also some challenges in impact financing. These include inadequate methods of outcome measurement, risk assessment, and uncertainties in financial markets. It is important for stakeholders like governments to communicate the benefits of impact financing to the investors, ensuring benefits for the larger community.