Oxfam’s impact investment fund has struck its first deal, with a $1m loan to a Mongolian machinery and equipment leasing company.

The fund, which is called the Small Enterprise Impact Fund, is a joint initiative between Oxfam, the City of London Corporation and Swiss asset managers Symbiotics. It launched at the start of the year and will target small and medium enterprises in developing countries, and seek to give investors both measurable social impacts and financial returns.

It has announced its first investment this week into Xac Leasing, which leases equipment to small business in Mongolia, and builds social and environmental reporting into its appraisal process.

Barbara Stocking, outgoing chief executive of Oxfam, said: "We are determined to prove to the investment industry that its scale and influence means it could play a significant role in eradicating poverty.  Our aim is to make impact investing a mainstream investment product which the sector recognises as a serious tool for both financial return and social impact.

“The fact that we have been able to make such a significant investment within our first year proves that the appetite exists within the financial community, and we are continuing to bring new investors on board now.” 

An Oxfam spokesman said investors into the Small Enterprise Impact Fund have included high net-worth individuals and pension funds. The City of London Corporation is currently the biggest investors giving $500,000 to the fund.

The fund is targeting a 5 per cent return for investors and aims to raise $100m in its first three years. The investments will be targeted at financial intermediaries supporting small businesses with a strong focus on food production and sustainability, as well engaging women in the economic cycle in the poorest regions of the world.