Overcoming Barriers for Impact Investing in Frontier Markets

Abstract

In this thesis, we develop a methodology for quantifying the attractiveness of a given region for impact investments. We take the attractiveness of a region to be the quotient of (i) the extent to which it contains conditions conducive to the growth of businesses, and (ii) the potential for political instability within the region. In order to calculate (i), we run cross-country regressions, using World Bank Enterprise Survey data as our response variables and a combination of structural and event data as our explanatory variables. In order to calculate (ii), we run an autoregressive time series model on event counts at the country and province levels. We find that the Enterprise Survey data is not fully representative of the business conditions in a given society, and we discuss how impact investors may use other sources of data, in particular data on the returns for their past projects, to implement our approach.