Investment impact evaluation of vietnam challenge fund

Structure of the study CHAPTER 1: THEORIES AND LITERATURE REVIEW 1.1 The challenge fund 1.1.1 Original of challenge fund and its characteristics 1.1.2 Challenge funds‟portfolio approac

VIETNAM NATIONAL UNIVERSITY, HANOI

SCHOOL OF BUSINESS

Hoang Thi My Hang

INVESTMENT IMPACT EVALUATION OF VIETNAM

MASTER OF BUSINESS ADMINISTRATION THESIS SUMMARY

Supervisor: Dr Nguyen Thi Phi Nga

Hanoi – 2012

1 Background and relevance of the study

2 Focus and scope of the study

3 Sources information and research method

4 Structure of the study

CHAPTER 1: THEORIES AND LITERATURE REVIEW 1.1 The challenge fund

1.1.1 Original of challenge fund and its characteristics 1.1.2 Challenge funds‟portfolio approach

1.1.3Enhancing Value Chain‟s approach

1.1.4 The challenge fund impacts

1.2 Impact investment evaluation of Challenge Fund

1.2.1 Impact investingconcept

1.2.2 Impact investment methods:

1.2.3 Impact investment method of Challenge Fund

1.2.4 Experimental method

1.2.5 Key measurements

1.3 Understanding the Vietnam Challenge Fund

CHAPTER 2: THE PROJECT ON H’MONG BEEF CONSUMPTION CHANNEL IN CAO BANG PROVINCE

2.1 Cao Bang profile

2.2 Current beef consumption channel in Cao Bang province

2.3 H’mong beef consumption channel project of The Vietnam Challenge Fund in Cao Bang province

2.3.1 Le Thanh Company – the main project implementing partner

2.3.2 Cao Bang H‟Mong beef project operation

CHAPTER 4: FINDINGS AND DISCUSSIONS

4.1 General characteristics of the sample

4.2 Social investment returns:

4.2.1 Income generation at Household /Farmer level

4.2.2 Job creation at worker/household level

4.3 Economic return of the company

INVESTMENT IMPACT EVALUATION OF VIETNAM CHALLENGE FUND:

A CASE STUDY OF H’MONG BEEF VALUE CHAIN PROJECT IN CAO BANG PROVINCE

Hoang Thi My Hang MBA Candidate, 2009-2012 Vietnam National University, Hanoi School of Business

Supervisor: Dr Nguyen Thi Phi Nga

INTRODUCTION

Background and relevance of the study

The Vietnam Challenge Fund have firstly introduced as a social venture investment fund in Vietnam since 2009 The fund is one of three components of the project Market for Poor Phase 2 (M4P2) There is an absence of systematical monitoring and evaluation tools to evaluate the impacts of the funds in promoting inclusive business in Vietnam parallel with pro-poor approaches Vietnam Challenge Fund is recognized as co-sharing funds to promote investment in private sector, especially encouraging innovation in agricultural value chains which directly effect to the poor By testing new supply chains systems, successful projects can contribute effective business model which can bring greater socio-economic benefits for the society

The impact investment evaluation plays an important role for donors and policy makers in project management and decision making in order to optimize benefit

of the projects achieve development sustainability and provide efficient aids In Vietnam, there is a shortage of methodology to evaluate an impact investment because of time consuming, expensive costs and complicated techniques

By analyzing a case study on impacts evaluation of the Challenge Fund project

on H‟mong beef production in Cao Bang province, this research aims to provide

a systematic analysis on social investment return in terms of job creation, income generation, and economic return of the company in terms of technical benefits, commercial benefits and financial benefits The result of this study will provide lessons learnt which contributes to enrich an effective tool for better project design, project assessments, and investment decision making of the future Challenge Funds

Focus and scope of the study

This study concentrates on analyzing impact investment of the Vietnam Challenge Fund on farmer households and company implementing partner before and after project implementation which is one of the main factors of the H‟mong beef value chain in terms of socio and economic returns The results will be explored by the following four research questions:

• What is the impact investment evaluation methods used of the Challenge Fund?

• How does challenge fund operation and Vietnam Challenge Fund work in Vietnam?

• How does the H‟mong beef production project work in Cao Bang province?

• How does the Vietnam Challenge Fund impact on socio-economic conditions of the poor households in the mountainous areas through the H‟mong beef production project?

Sources information and research method

The primary data was collected from the questionnaires and depth interviews of

which 25 households participated in the cow rearing project and other 25 households not participated in the project

Structure of the study

The research includes five chapters Chapter 1 presents theories and literature reviews on impact investing concept, challenge fund definition and its impacts, impact investing evaluation of challenge fund and understanding the Vietnam Challenge Fund Chapter 2 identifies the methodology used in this study Chapter 3 present briefly information about the H‟mong beef production project and how does it work in Cao Bang province Chapter 4 presents findings and discussions about the impacts of the fund to the project in term of social and economic returns by examining treatment and control groups and within treatment groups before and after project implemented Chapter 5 presents the main conclusions on the Challenge Fund evaluations and some lesson learnt for future study

CHAPTER 1: THEORIES AND LITERATURE REVIEW

1.1 The challenge fund

1.1.1 Original of challenge fund and its characteristics

The challenge funds was first introduced by the United Kingdom as a kind of impact investing funds for promoting investment in private sectors Several donors have also been actively promoting challenge funds across 53 countries in Asia, Latin America, Eastern Europe and Africa CGAP‟s Pro-Poor Innovation Challenge

The challenge funds firstly aimed to leverage effective investment and prompt innovation of the private sector, non-government organization and entrepreneurship (Sweden International Development Agency 2012) Secondly, the challenge funds have been recently used as a pro-poor approach in development interventions as a way of corporation with private sectors to generate economic growth and poverty reduction by supporting funds for innovative business models engaging the poor‟s participation Thirdly, the challenge funds have established in developing countries to reduce impacts of market failures and externalities which prevent the private sector from development and innovation (Barkat et al 2002)

1.1.2 Challenge funds’ portfolio approach

Theoretically, a project can be defined as one of the four following project types

as the graph below:

Chart 1.2 Four types of the existing project in practices

Source: Porteous & Irwin 2005, FDCF OPR, p.13

From the above chart, the project (B) that has low financial and social return will not be feasible for investment The project (A) that has high financial returns but low social returns can operate effectively by the private sector without any interventions The project (C) has low financial returns and high social returns facing financial difficulties in seeking funds and needs financial support from the government or other organizations Finally, the project (D) has both high financial returns and high social returns which rarely exist in the practice (Porteous & Irwin 2005, p.13) The objective of the challenge fund is to provide funds for the project (C) to ensure that it becomes the project type (D)

in order to bring high potential social returns to the communities

1.1.3 Enhancing Value Chain’s approach

The definition by the United Nations Industrial Development Organization (2009, p.10) states that „the value chain is a concept which can be simply described as the entire range of activities required to bring a product from the

initial input-supply stage, through various phases of production, to its final market destination‟

In the challenge fund approach, the poor are viewed as deprivation of resources

It is necessary to provide opportunities and specific skills in order to enhance their ability to access the market with higher value food chains which directly improve the livelihoods of poor farmers (Moustier and Anh 2009)

Recently, the value chain concept is applied as a pro-poor in the social venture investment funds and other development interventions Value chain analysis might be a tool to design projects and programs in order to provide support to a value chain, or set of value chains, in order to achieve a desired development outcome

1.1.4 The challenge fund impacts

There are many studies across countries and regions illustrating that challenge funds contribute to leverage effective investment, prompt innovations, effective pro-poor approaches, reduce impacts of market failures and externalities and bring significant social benefits in terms of job creation and income generation

1.2 Impact investment evaluation of Challenge Fund

1.2.1 Impact investing concept

Impact investment evaluation is a crucial part of risk management There are several ways of interpreting impact investment concept from different points of view:

In general, Rossi and Freeman (1993) consider impact investment including conceptualization, design, implementation and utility of social intervention programs” Carlsson et al, (1994) defined the assessment activities is “an activity for finding out the value or results of something which will provide the information are required from specific purposes”

In the development project concept, Reidar (1998 p.57) argues that impact investment can be analyzed at the certain time in the aspects of “efficiency, effectiveness, relevance, impacts and sustainability” This definition has broadly approached in assessment of development activities

In the concept of social adventure fund, “Impact investments are investments of companies, organizations, and funds with the intention to generate measurable social and environmental impact alongside a financial return The aim of this report only analyses the investment impact of challenge funds in the aspect of development projects

1.2.2 Impact investment methods:

Impact investing evaluation focuses on how the programs, projects effect on individuals, households and institutions and draw up lessons learnt for program interventions Impact investing evaluations can also explore unintended consequences, whether positive or negative on beneficiaries Depending on different purposes, impact evaluation can be defined into two main types: formative and summative evaluation (Reidar 1998)

There are wide ranges of impact investing evaluation approaches which can be defined by their purposes or kinds of information needs

Table 1.1 Some approach methods of impact evaluation

design analysis

Systems analysis Project planning and

performance evaluation

Graphic and mathematical

Descriptive and mathematical

Causal networks Ongoing planning

and revision of evaluation design and

hypothesis and findings

Graphic or matrix

Descriptive or simple numerical

Process modeling Evaluation planning

and defining format for presenting findings

Graphic Descriptive and

numerical

Path analysis Estimating the

contribution of project components and non-project variables to project outcome

Graphic and statistical

Multivariate analysis

Source: Reidar (1998)

The experimental research type of study is quite prominent in evaluation

1.2.3 Impact investment method of Challenge Fund

The center of impact investment evaluation is defining external factors or counterfactual factors which resulted in the project outcomes as the impact of

the investment intervention Defining counterfactual factors are the core issue of the evaluation design The common method is the use of comparison methods between comparison groups (those who do not participate in a program) with control groups (those receive the intervention) (Baker 2000)

1.2.4 Experimental method

Among above methodologies, experimental designs are considered the best optimal approach This method is a combination of „with and without‟ approach with a „before and after‟ approach that uses baseline study and follow-up data is strongly recommended from a methodological perspective (Subbarao 1999 cited

in Jones et al 2009)

The experimental method will be carried out as the following steps:

First, a random assignment is used to define (a) control group (experimental group) and (b) a comparison group (quasi-experimental group) in order to estimate the counterfactual factors Second, data of different participation from pre- and post-program intervention is collected from baseline and follow-up survey Third, the treatment and comparison groups are defined at sufficient sizes to ensure statistical inferences with minimal attrition Fourth, cost-benefit and cost-effectiveness analysis are integrated to measure the project efficiency Finally, qualitative techniques such as statistics and econometrics are incorporated to achieve the comprehensive findings

1.2.5 Key measurements

In order to measure impacts of the project to livelihood improvement for the poor, two key measurements were used including job creation and income generation

Job creation: this concept can be measured by the number of full- time jobs

created

Income generation: Income is the standard measurement for the overall wealth

of residents and might also have impacts on level of living of the respondents

Company benefits: Number of target enterprises who realize a financial benefit

as a result of the program‟s activities per year and cumulatively This study will examine economic return of a challenge fund project in terms of technical benefits, commercial benefits and financial

1.3 Understanding the Vietnam Challenge Fund

The Vietnam Challenge Fund (VCF) is one of the three components of the market for poor programs (M4P) The Vietnam Challenge Fund portfolio:

• Geography: spanning 11 provinces

• Funding sectors: fruit, livestock and fish, staples such as cassava, and major export crops - coffee, tea

• Type of company granted: State Owned Enterprises, small private firms,

a foreign multinationals, joint-ventures

• Size of project: from US$2,550,000 to US$86,200

• Size of grant: from US$275,000 to US$40,000

(website market for poor 2011)

When launching the program in 2009, VCF received 210 proposals from all types of agriculture business across country Basing on performance criteria of Vietnam Challenge Fund, the eleven projects that were approved for grant funding which accounted for US$1.26 million By testing new supply chains systems, successful projects can contribute effective business model which can bring greater benefit for the society