By the Numbers is a biweekly data-driven series in partnership with EFG Holding that unpacks business news and economic trends across the MENA region. Through visuals and statistics, each edition brings clarity to the numbers shaping the future of our region.

The Middle East and North Africa (MENA) region faces urgent challenges like a $660 billion annual funding gap for sustainable development. Yet, the region captures only 2% of the world’s impact investment capital. This disconnect represents a massive untapped opportunity.

Why Impact Investing Matters in MENA, Right Now

Beyond Profits

Impact investing directs money into companies or projects designed to generate measurable social or environmental benefits alongside financial returns. Investors generally fall into two categories:

• Impact-first investors prioritize achieving positive change (like clean water access or quality education) and accept financial returns that meet a minimum threshold (70% of MENA impact investors). 
• Finance-first investors primarily seek market-rate financial returns but set a clear minimum standard for the social or environmental good their investments must achieve (30% of MENA impact investors).

Why Focus on MENA?

The region presents a unique convergence of pressing needs and powerful assets. It suffers from severe water scarcity and requires massive reconstruction in countries like Syria, Libya, and Iraq. Simultaneously, MENA holds significant resources, including vast sovereign wealth funds and a deep tradition of Islamic finance aligned with ethical goals. Impact investing is tailor-made for tackling these challenges while generating returns.

By the Numbers: Impact Capital Still Bypasses MENA

The data reveals a stark imbalance:

1. Globally, impact investing is booming. Over 3,900 organizations now manage $1.57 trillion in impact assets.
2. This market grew at a healthy 14% per year between 2019 and 2024.
3. However, MENA captures only 2% of these global assets, the smallest share among major developing regions.
4. 70% of global impact funding flows to the developed North America and Western Europe, deepening the dilemma.
5. Within MENA’s own venture capital scene, impact-focused deals represented just 7% of total VC funding between 2016 and 2021, growing annually by about 15%.

The gap between MENA’s needs and the impact capital it attracts is one of the world’s most significant investment paradoxes.

What Held the Region Back?

Several key hurdles explain why impact capital hasn’t flowed more freely into the region:

• The Exit Dilemma: Lack of exit options ranks as the #1 investor challenge. Impact ventures struggle to offer clear liquidity pathways (e.g., acquisitions/IPOs) due to niche markets or untested business models, deterring risk-averse capital.
• Institutional Capital Lags: Major development finance institutions (DFIs) invest far less in MENA compared to other regions. For example, in 2024, the International Finance Corporation (IFC) committed only $6.5 billion to MENA, far less than any other region. This signals a lack of catalytic support from institutions designed to promote development.
• A Fragmented Playing Field: Expanding impact solutions across borders within MENA is difficult. Each country has different regulations, licensing requirements, data privacy laws, and financial clearing systems. This complexity significantly slows down growth for startups and funds trying to scale regionally.
• The Talent Gap: Companies report that finding workers with skills to implement sustainability actions is a top leadership challenge. Without talent trained in impact measurement and green technologies, even well-funded projects struggle to deliver results.
• The “Measurement Problem”: The UNSDGs are the most used impact measurement framework in the MENA region. Still, there’s no universally accepted way to measure and report social or environmental impact. The lack of clear proof fuels skepticism, making it harder for genuine impact ventures to attract funding and undermining trust in the whole sector.

The Story Isn’t Over, Thanks to These Forces

Despite the challenges, powerful forces are aligning to unlock MENA’s impact potential:

• Sovereign Wealth Funds Step Up:
  The region’s massive sovereign wealth funds (SWFs), controlling roughly 40% of global SWF assets, are driving impact priorities. In 2024 alone, MENA SWFs deployed $165 billion into climate tech, healthcare, and digital infrastructure (EY, 2024). Crucially, nearly 40% of MENA startups now receive funding traceable to Saudi Arabia‘s SWFs, fueling national visions like Saudi 2030.
• Islamic Finance’s $3.4 Trillion Opportunity:
  The global Islamic finance market is projected to reach $7.5 trillion by 2028. This capital—rooted in ethical principles—is being channeled into SME funding, microfinance, and scalable impact models. 
• Family Offices Embrace Impact:
  Nearly half (47%) of family offices in MENA now invest in sustainable or impact opportunities, with plans to double allocations in five years. Many partner with social enterprises to amplify their reach.
• VC Market Transformation:
  A decade ago, studies like Idrissi’s cited MENA’s nascent VC industry as a critical barrier to impact investment. Today, the landscape has flipped: Despite global declines, MENA’s 2024 VC funding fell only 29% (vs. 44% in Africa), remaining 3x above pre-pandemic levels—the only market globally to do so.This resilience is increasingly driven by local institutions like EFG Hermes, an EFG Holding company, which operates specialized impact platforms including Rx Healthcare (expanding medical access in Africa), and a $300M education fund with GEMS to transform K-12 learning in Egypt.
• Catalytic Capital Emerges: Initiatives like ALTERRA ($30 billion at COP28) de-risk large-scale climate projects, attracting mainstream investors.

Building the Future: A Roadmap for Stakeholders

To bridge the gap and capture its impact potential, MENA needs coordinated action:

• For Governments & Regulators:
  • Adopt holistic ecosystem strategies: Simultaneously develop capital supply (investors), demand (entrepreneurs), and enabling environments (regulation/skills), rather than only focusing on the entrepreneurs’ hype.
  • Streamline regulations and licensing across borders to make it easier for impact ventures and funds to scale regionally.
  • Enhance professionals’ and startups’ capacity building in sustainable projects’ implementation and evaluation.
• For Investors:
  • Leverage sovereign wealth and philanthropic capital to provide patient, risk-tolerant funding for early-stage impact ventures.
  • Still, a recent survey confirms that VCs and institutional investors are the most effective impact vehicles in the region.
  • Here’s the formula: Blend SWF scale with VC effectiveness through co-investment vehicles.
  • Tap Islamic finance’s growth for SMEs and renewables.
• For Impact Entrepreneurs:
  • Build expertise in robust impact measurement alongside core business skills like financial management and IP protection.
  • Focus on scalable solutions in high-impact sectors where MENA has acute needs and growing investor interest: renewable energy, education technology (edtech), and healthcare technology (healthtech).

Impact Investing & MENA: A Perfect Match

MENA’s demographic dividend, tech momentum, sovereign capital, and faith-aligned finance give it ingredients few regions share. By embedding impact into all entrepreneurship and forging collaborations between SWFs, VCs, and Islamic finance, the region can turn necessity into opportunity. If stakeholders act together, the 2% figure can flip quickly.