For much of the last decade, sustainable finance has centred on decarbonisation. However, in Africa, and particularly in South Africa, an equally urgent question sits alongside it: who is excluded from the economy in the first place? Michael Avery is joined by Nikki Griffiths from RMB’s Sustainable Finance team and Cobus Truter, CEO of Indlu Living, to explore social finance. To date, Indlu has financed around R300 million in township property developments, unlocked capital for previously underserved black entrepreneurs, and helped create more than 2,200 affordable rental units – using a social bond programme designed to scale impact while delivering sustainable commercial outcomes.
RMB | Sustainability Talks - Episode 3: Social Impact with Nikki Griffiths from RMB and Cobus Truter
What was discussed
Social Finance – The real economics and opportunities of informal housing
One of the most uncomfortable questions in South African business is: who is the economy really built for, and who is excluded?
This is where social financing comes in. Social financing is not about charity or grant funding; it focuses on redesigning financial systems to recognise value where it is systematically overlooked.
The informal housing market is one example, which accounts for roughly 35% of South Africa’s rental market.
The third episode of the Sustainability Talks podcast focuses on this topic, with host Michael Avery speaking to Cobus Truter, the Co-founder and CEO of IndluLiving, and Nikki Griffiths, the Social Impact Lead at Rand Merchant Bank (RMB).
The conversation unpacks what happens when finance stops treating cases like the informal housing market as risks and instead sees them as opportunities.
Social financing in the South African context
The debate around ESG in South Africa often focuses heavily on environmental and governance issues, neglecting the social aspect.
However, Griffiths notes that social finance is an extremely important part of the equation, as it focuses on finding market-based solutions to social challenges.
“In many cases, when you see it as an opportunity, there’s a real way we can scale solutions that address inequalities,” she explains.
The informal housing market in South Africa is an excellent example of this, as the country faces a 2.6-million-unit housing backlog, but the chief suppliers of new housing are often locked out of formal credit despite generating consistent cash flow.
The potential of the informal property market is therefore huge, as Truter outlines by touching on IndluLiving’s strategy.
IndluLiving’s approach is to use the rental market to build affordability while working with grassroots developers, creating an inclusive model where no one is excluded.
This strategy has yielded excellent results thus far and demonstrates that, with the right model, investors will enjoy considerable returns.
Commercial returns
While social financing in the South African housing market is an excellent investment opportunity, it can be difficult to determine precise commercial returns.
Griffiths explains that RMB has found the best way to resolve this issue is through a blend of financing mechanisms that allow for concessional and commercial capital.
A key part of this is ensuring that the created solution will attract investor capital.
IndluLiving is a great example of where this method has proven successful, with the company’s focus on return and impact remaining consistent throughout the transaction process.
This is essential, as investors are highly discerning and require precise fund tracking and transparency around impact.
“There’s a lot of nuance around social transactions, and investors will buy into it if they believe that the intervention will have the impact they want,” Griffiths said.
Scaling and measurable impact
Social financing and solutions in the informal housing market need to be designed to scale with firm KPIs and performance goals.
Truter notes that IndluLiving recognised this requirement and has structured its business model accordingly, with its primary KPI being the number of affordable housing units provided relative to the housing backlog.
Along with this, it measures the capital value being dispersed to emerging developers and contractors, as well as the wider job creation during the construction period.
This ensures that potential investors can see the value they provide and the long-term impact they may have on South Africa.
As Truter explains, capital participation is one of the biggest bottlenecks in this market, and RMB support has been instrumental in laying the foundation for the business.
Building impactful solutions for the future
Griffiths noted that RMB, through its efforts to build scalable solutions, has learnt that no two transactions are identical and that implementing the same solution for different social challenges is ineffective.
Instead, it found that flexibility is key to building mechanisms which are relevant.
Additionally, RMB has realised that everyone has a role to play in social financing and addressing social challenges, and it sees many encouraging signs for the future.
This includes traditional grant providers being more willing to engage with commercial-oriented transactions and the state taking a proactive stance on blended finance solutions with the private sector.
The informal housing market in South Africa is an excellent opportunity for social finance and for investors who choose to participate.