FEBRUARY 14, 2017 – ImpactAssets has released its 2016 list of top impact investing fund managers, the ImpactAssets 50 (IA 50), a free online resource for investors and financial advisors. The sixth annual guide features fund managers representing private debt and equity investments that deliver social and environmental impact as well as financial returns. Creation Investments Capital Management, LLC was once again awarded with distinction in the IA 50 for 2016.
Fund managers included in the IA 50 2016 manage an estimated $10.6B in assets devoted to creating positive social and environmental impact.
“As impact investing continues to move from niche to mainstream, those new to the field – as well as impact veterans – appreciate the IA 50’s broad overview of innovative fund strategies,” said Jed Emerson, Chief Impact Strategist, ImpactAssets. “The IA 50 roster offers a great overview of innovative managers and diverse approaches to creating impact with investment capital.”
The IA 50 is the only free, public, searchable database of outstanding impact investing fund managers. This year’s showcase, which includes funds based in the United States, Africa, Europe and Latin America, highlights the increasingly diverse opportunities for investors to help create social value across the globe. Fund managers represent a breadth of asset classes, ranging from real assets like farmland and clean tech, private thematic debt and community development finance institution (CDFI) financing, to private early and growth stage equity in US and emerging markets.
The list demonstrates an increased thematic focus on alternative energy, climate change and clean technology. Fund managers continue to focus as well on affordable housing and community development, sustainable agriculture and low-income financial services and micro-insurance.
The IA 50 Review Committee is chaired by Jed Emerson, Chief Impact Strategist of ImpactAssets. Jennifer Kenning, CEO and Co-Founder of Align Impact served as the Committee’s Senior Investment Advisor. Members include, Karl “Charly” Kleissner, Co-Founder of Toniic and KL Felicitas Foundation; Kathy Leonard, Senior Vice President, Investments and Senior Portfolio Manager for UBS; Deval Patrick, Managing Director of Bain Capital; Liesel Pritzker Simmons and Ian Simmons; Co-Founders of Blue Haven Initiative; Fran Seegull, Executive Director, U.S. Impact Investing Alliance of Ford Foundation and Matthew Weatherley-White, Managing Director of The CAPROCK Group.
“The IA 50 was designed to help convert interest into action by showcasing funds with expert management and solid track records,” said Matthew Weatherly White, Managing Director, The CAPROCK Group. “Investors who have been watching from the sidelines and waiting for the field to mature will find no shortage of opportunities.”
“The depth, breadth and caliber of this year’s IA 50 applicants are testimony to the increased demand by investors for high-impact solutions,” said Jennifer Kenning, CEO and Co-Founder, Align Impact.
The IA 50 is not an index or investable platform and does not constitute an offering or recommend specific products. It is not a replacement for due diligence. In order to be considered for the IA 50 2016, fund managers needed to have at least $10M in assets under management, more than 3 years of experience as a firm with impact investing and documented social and/or environmental impact, as well as accept investment from U.S.-based investors. Additional details on the selection process are here.
ImpactAssets is a nonprofit financial services firm that increases the flow of capital into investments that deliver financial, social, and environmental returns. ImpactAssets’ donor advised fund (The Giving Fund), Impact Investment Notes, and field building initiatives enable philanthropists, other asset owners, and their wealth advisors to advance social or environmental change through investment.
Muthoot Microfin Ltd (MML), a part of diversified financial services company Muthoot Pappachan Group (MPG), has raised growth capital for its microfinance business from Chicago-based PE fund Creation Investments Llc in its first private equity round of funding for any of its group companies, it said in a statement.
The firm has tied up for Rs 130 crore (around $20 million) of growth capital from the PE firm for an 11% stake in Muthoot Microfin, valuing the company at over Rs 1,111 crore.
The company proposes to open 500 more branches in three years. It will use the investment to spread mobile-based collection technology in rural areas.
The promoters will also infuse additional Rs 150 crore of capital which would be used to cater to bottom of the pyramid (BoP) clients and to expand business to newer geographies such as Bihar, Uttar Pradesh, Odisha, Chhattisgarh, Haryana and Punjab, in addition to the 10 states where it already operates.
Of late, micro-lending companies have been under stress as the cash crunch following the government’s demonisation drive hit them hard.
The company said MML uses hand-held devices to collect instalments and routs its payments via mPesa.
The group has presence in various other sectors, including hospitality, automotive, realty, IT services, healthcare, global services and alternate energy. Its non-banking financial company (NBFC) Muthoot Capital Services Ltd is a listed entity with a market capitalisation of Rs 320 crore and offers commercial and consumer finance products. Promoters own about 74% stake in the firm.
Muthoot Fincorp, the group’s flagship entity, offers gold and other loans. Muthoot Housing Finance Company Ltd, another group firm, offers housing loans.
Listed Muthoot Finance Ltd is different from Muthoot Pappachan Group.
Muthoot Finance is backed by private equity investors including Abu Dhabi Investment Council, Citigroup, GIC, Goldman Sachs Asset Management and Kotak India Growth Fund.
In the past, it had attracted PE investors like Baring India PE and Matrix Partners which have already exited.
Thomas Muthoot, executive director, Muthoot Pappachan Group, said, “Our overall microfinance customer base is at 13 lakhs and we have provided loans to over 4 lakh rural households in FY2016-17 till December 2016. We have moved to complete bank disbursals. As a result, we are able to disburse loans worth Rs 300 crore every month.”
“The microfinance business has performed well over the last six years. Promoters have committed to infuse capital worth Rs 150 crore into the company by March 2018,” he said.
Sadaf Sayeed, CEO, Muthoot Microfin Ltd, said the company’s assets under management (AUM) grew at 122% (annualised) while profits and loan disbursements grew 222% and 75%, respectively, over the last year.
Its AUM grew from Rs 653 crore in March 2016 to Rs 1,252 crore as of December 2016 and PAT rose from Rs 9.4 crore for FY2015-16 to Rs 25.11 crore till 31 December 2017. It expects PAT to reach Rs 35 crore by 31 March 2017. Its disbursements grew form Rs 765 crore in FY2015-16 to Rs 1185 crore till end of third quarter of FY2016-17, it said in the statement.
The company said despite the recent disruption, its business is growing at a growth rate of 280% with non-performing assets (NPAs) at less than 0.60%.
In the next three months, it plans to disburse Rs 1,000 crore of loans to clients in a cashless manner. In the nine months of the current financial year, the firm has opened 166 branches across 10 states. Muthoot Microfin aims to reach Rs 10,000 crore of AUM by March 2020 and plans to expand its client base from 1.3 million households to 4 million households in three years, Sayeed said.
BMR Advisors acted as financial adviser while AZB &Partners acted as legal adviser to Muthoot for the transaction. Positron Consulting Services and J.Sagar & Associates acted as financial and legal advisers, respectively, for Creation.
Muthoot Microfin was granted NBFC-MFI licence by the reserve Bank of India (RBI) in 2015. The group hived off the microfinance business to the newly licensed firm last year.
Creation focuses on private and control equity investments in microfinance institutions, small-and-medium enterprise lenders, BoP financial services providers and other social ventures in emerging markets, seeking to maximise financial and social returns on investment. The firm started investing in India in 2011 and has since then made multiple investments in the country by backing companies such as Eko India Financial Services, Equitas Holding, Fusion Microfinance, Grameen Koota Financial Services and Sonata Finance.
Philanthropic Pioneers: Foundations and the Rise of Impact Investing Stanford Social Innovation Review and Mission Investors Exchange commenced their new series “Mission Possible: How Foundations are Shaping the Future of Impact Investing”, Jan. 2017
“Impact Investing” inches from Niche to Mainstream The Economist, Jan. 2016
Impact Investing Trends: Evidence of a Growing Industry GIIN, Dec. 2016
The Year in Social Enterprise and Impact Investing: 5 Happenings of Note in 2016 Forbes, Dec. 2016
The Risk and Opportunity For America’s Corporate Pension Plans Forbes, Jan. 2017
Creating Quality Jobs to Fight Income Inequality Opportunity Finance Network, Jan. 2017
Three Lessons for Impact Investing Education Programs Stanford Social Innovation Review, Dec. 2016
Omidyar, Hoffman create $27M research fund for AI in the public interest Tech Crunch, Jan. 2017
Three Trends in System-level Impact Investing Stanford Social Innovation Review, Dec. 2016
Investors Continue to Push for Sustainability Data Sustainable Brands, Jan. 2017
A New Fund Seeks Both Financial and Social Returns New York Times, Dec. 2016
How Investors Can (and Can’t) Create Social Value Stanford Social Innovation Review, Dec. 2016
Fisheries-Focused Investment Fund Announces First Deal PR Web, Jan. 2017
Are Small Businesses America’s Most Overlooked-And Valuable-Charity Case? Fast Company, Jan. 2017
Climate-Related Investment for Resilient Communities Croatan Institute, Dec. 2016
GIIN IMPACT INVESTING TRENDS ANALYSIS REPORT FINDS SUSTAINED GROWTH IN ASSETS, AND HIGH LEVEL OF SATISFACTION WITH FINANCIAL RETURNS AMONG INVESTORS
Study of impact investing market shows 18 percent compound annual growth rate in assets under management between 2013 and 2015; with 85 to -95 percent of investors meeting or exceeding returns expectations each year
Click here to download the report
NEW YORK and AMSTERDAM, December 07, 2016—A study released by the Global Impact Investing Network (GIIN) at the opening today of its two-day Investor Forum 2016 in Amsterdam found that impact investors reported substantial growth over the last three years. The Impact Investing Trends: Evidence of a Growing Industry report has found that among a consistent sample of dedicated impact investors, both overall assets under management and capital raised by fund managers increased substantially at a compound annual growth rate of 18 percent between 2013 and 2015. Additionally, the study found that up to 95 percent of impact investors surveyed report financial returns at or exceeding expectations and 98 percent met or exceeded impact expectations.
Since 2011, the GIIN’s Annual Impact Investor Survey has provided valuable ‘state of the market’ information on the impact investing industry. This report, based on data provided by 62 repeat respondents to the past three surveys, is the first major report of trends in industry activity and is thus a significant development in tracking growth over time.
Some key findings of the survey include:
• Survey respondents demonstrated strong growth, collectively increasing their impact investing AUM from USD 25.4 billion in 2013 to USD 35.5 billion in 2015, a compound annual growth rate of 18 percent.
• The survey showed a steady flow of activity, with respondents committing a total of USD 7.1 billion to 3,332 deals in 2013, USD 9.2 billion to 3,726 deals in 2014, and USD 9.1 billion to 3,096 deals in 2015.
• The volume of capital raised by fund managers increased at a compounding rate of 18 percent each year, growing from USD 1.7 billion in 2013 to USD 2.3 billion in 2015.
• Financial performance was at or above expectations for 85 percent to 95 percent of respondents each year; impact performance was at or above expectations for 98 percent of respondents.
• Over 60 percent of AUM was in emerging markets and approximately 70 percent of AUM was allocated through private debt and private equity each year.
• The sectors accounting for the highest proportions of AUM were microfinance and other financial services, energy, housing, and food & agriculture.
The GIIN hopes that insights from this research will further the impact investing industry’s reach and impact, enable data-driven decision making, and improve transparency as the market continues to grow.
“The Impact Investing Trends Report provides compelling evidence of a growing impact investing industry,” said Amit Bouri, co-founder and CEO of the GIIN. “The report illustrates that impact investing is a powerful movement driven by investors of all types who are effectively putting their capital towards solutions to issues in areas like conservation, education, and affordable housing. The positive trends support that investors are increasingly bullish about the use of capital to address social and environmental challenges, and we are confident that this trend will continue.”
November 15, 2016 – Te Creemos Holding, S.A.P.I. de C.V., a Creation Investments portfolio company and the parent company of Te Creemos, S.A. de C.V. Sociedad Financiera Popular, has announced the acquisition of 100% of the shares of Financiera FINCA, S.A.P.I. de C.V., SOFOM, ENR (“FINCA Mexico”).
Creation Investments worked alongside the founding shareholders of Te Creemos Holding as well as Mexico Development Partners and its manager PC Capital Management, S.C. to lead a follow-on investment in Te Creemos Holding to finance the acquisition of FINCA Mexico, a microfinance institution with over 67 branches in 20 different states of Mexico and a loan portfolio of more than $680 million pesos. The acquisition will allow Te Creemos to grow over 50% in terms of revenues and loan portfolio and position itself as the second largest microfinance institution focused on working capital loans in the country, with over 240,000 clients nationwide.
Te Creemos and its subsidiaries have been operating since 2005, providing comprehensive financial services to underserved communities in Mexico. In its 11 years of operation, the company has served over one million customers with savings, insurance, and credit products. With the acquisition of FINCA Mexico, Te Creemos now has a consolidated loan portfolio of approximately $2.0 billion pesos and its footprint reaches 23 states of Mexico with a total of 227 branches.
“We are excited to have worked closely with the Te Creemos management team and shareholders to complete this landmark transaction,” said Bryan T. Wagner, Creation Investments Partner and Board Member of Te Creemos Holding.
Jorge Kleinberg, CEO of Te Creemos, added, “We are pleased to announce the acquisition of FINCA Mexico, one of the pioneers of microfinance in Mexico. The transaction represents an opportunity to consolidate our leadership position in the Mexican market and realize substantial synergies in 2017 and beyond.”
About Creation Investments Capital Management
Creation Investments Capital Management is a private equity firm focused on financial services in emerging markets. Based in Chicago, the firm currently manages 13 platform investments in financial institutions across Latin America, South Asia, Southeast Asia and Eastern Europe. Creation’s investors include leading institutional investors and family offices dedicated to achieving attractive financial returns and social impact.
October 3, 2016:
Group Lease Plc’s board of directors gave the green light to its subsidiary Group Lease Holding to acquire the stakes in Sri Lanka’s listed Commercial Credit and Finance Plc (CCF) and Myanmar-based BG Microfinance Myanmar (BGMM) for around 2.79 billion baht ($80.67 million). The first deal will be the acquisition of 29.99 per cent interest in CCF from BG Investments (PVT) Ltd., Creation Investments Sri Lanka LLC (Creation SL) and Mr. Stephen L Lafrance Jr for 10.59 billioon Sri Lankan rupee (about $72 million). For the other deal, it will acquire the 100 per cent stake in BGMM from BG Investments (PVT) Ltd, BG International (PVT) Ltd, BG Capital (PVT) Ltd. and Commercial Credit and Finance PLC for $8 million.
“We expect our investments in both CCF and BGMM will create the sustainable growth for our income and profit. Moreover, it will be a good chance for us to learn new know-how of microfinance which will support our future expansion in Cambodia, Laos, Indonesia and Thailand,” Tatsuya Konoshita, director of Group Lease, said. CCF is one of the fast-growing finance companies in Sri Lanka, which provides various services including leasing, deposits, gold loan, micro finance and real estate and land sales.
It posted 11.9 billion Sri Lankan rupees ($80.9 million) in revenue for the fiscal year 2014-15, an increase of 61.4 per cent from the previous fiscal year. The net profit was posted at 2.1 billion Sri Lankan rupees ($14.3 million), up 108 per cent on year. Currently, around 46.5 per cent of CCF’s assets are loans and receivables and 34.5 per cent are leasing business.
Konoshita said that CCF is looking to expand in other industries such as banking and insurance, which could be another synergy for Group Lease in the coming years. In the filing, Group Lease cited that it will potentially have the right of taking over 70 per cent of CCF in the future. Meanwhile, BGMM is one of a few existing licensed microfinance firms in Myanmar where the authorities have no plan to issue more licenses of this business at the moment.
He cited that BGMM has grown rapidly after two years of its operation and Group Lease will inject more capital to scale up the number of branches once the deal is completed. “This is our significant step to enter into the Myanmar market where the population is looking for access to finance and this type of industry is corresponding well to the economic level of the population,” he explained. Group Lease will use both internal cash flow and external sources of fund to fund both acquisitions.
Read more at: http://www.dealstreetasia.com/stories/thai-listed-group-lease-acquire-stakes-microfinance-firms-sri-lanka-myanmar-80-67m-54554/
Thai motorcycle lessor Group Lease PCL plans to buy 71.9 percent of BG Microfinance Myanmar from Sri Lanka’s Commercial Credit and Finance PLC for an unspecified amount, to take advantage of rising microfinance demand in Southeast Asia.
Through the deal, Group Lease will expand its regional presence, adding Myanmar to Thailand, Cambodia, Laos and Indonesia, Chairman and Chief Executive Mitsuji Konoshita said at a joint briefing.
The deal will be completed shortly, pending due diligence of BG Microfinance, Konoshita said. Group Lease aims to book earnings from the Myanmar firm in the fourth quarter, he said.
BG Microfinance is a subsidiary of Commercial Credit and has operated in Myanmar for more than two years.
Group Lease is also considering joining Commercial Credit to do similar business in other Southeast Asian countries, Konoshita said.
Roshan S. Egodage, CEO of Commercial Credit, said BM Microfinance has about 10,000 customers in Myanmar where competition is relatively low given the government is unlikely to issue licences to new entrants soon.
The Thai firm will inject $6.8 million into BG Microfinance to expand to 12 branches in Myanmar next year from three at present, Konoshita said. That should raise its portfolio to $30 million to $40 million next year, and increase monthly profit tenfold to about $200,000, he said.
Group Lease is one of Thailand’s biggest three motorcycle lessors with a market share of 10 percent to 11 percent, Konoshita said. It is market leader in Cambodia and Laos with shares of 95 percent and 40 percent respectively, he said. (Reporting by Manunphattr Dhanananphorn; Writing by Khettiya Jittapong)
Microfinance leaves India’s banks in the dust
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
Microfinance is making India’s big banks look bad. Small lenders that help the poor buy everything from bicycles to sewing machines are back and growing at breakneck speed after the industry nearly collapsed six years ago.
The last boom ended badly after a number of borrowers committed suicide. That prompted authorities in Andhra Pradesh to effectively stop micro lenders collecting debts. The state once accounted for up to 40 percent of industry loans. The Reserve Bank of India has since capped usurious lending rates.
India’s microfinance firms typically focus on lending to women in groups where they act as guarantors for one another. That ensures social pressure to repay. Scale, technology, and shared credit data has helped the industry to thrive again in a segment underserved by big banks.
Bharat Financial Inclusion is the ultimate comeback kid. The group, formerly known as SKS Microfinance, shrunk after the crisis and is now growing fast. Lending rates are now below 20 percent – not too far off what big banks offer well-heeled unsecured borrowers.
Net interest income grew almost 70 percent year on year in the first quarter, gross non-performing loans are almost negligible at 0.1 percent, and BFI earns a 29 percent return on equity.
That’s much better than India’s largest lender, State Bank of India, where interest income is growing at 4 percent, gross NPLs are 7 percent, and ROE is below 8 percent. Other state banks are in worse shape.
Banking is a preferred way to bet on rising consumer power. But the poor health of India’s traditional lenders, after years of crony capitalism, has forced investors to look elsewhere. That helps explain why BFI shares have risen 50 percent this year, while shares in smaller rival Ujjivan Financial Services have risen almost as much since it listed in May. U.S. private equity group TPG also recently led another fundraising for Bengaluru-based Janalakshmi Financial Services.
BFI looks fully valued at almost 4 times book value but other measures suggest room to run. Eikon data shows the lender trades at just 15 times forward earnings, a measly premium to SBI on almost 14 times. Super-fast growth is always risky in finance but microfinance firms are well-placed to meet the huge demand for credit from India’s poor.
> Posted by Anna Kanze, Chief Operating Officer, Grassroots Capital Management
The initial public offering (IPO) of Chennai-based Equitas Holdings Ltd., the holding firm for the fifth-largest microlender in India, was very successful, raising nearly US$235 million (Rs 1,525 crore) and demonstrating the maturation of the microfinance and financial inclusion sectors in India.
When the stock opened on April 7 to the domestic market, the demand greatly exceeded the number of available shares (16x oversubscribed) and provided a strong exit (an average multiple of 3.6x) for Equitas’ shareholders, which included a mix of social and responsible investment funds and traditional private equity investors. The stock opened to international buyers on April 21 and closed with a price on the first day of trading 23 percent above the issue price.
Funds managed by Caspian Impact Investment Adviser (Caspian), an Indian investment management and advisory services company that invests capital in businesses delivering both financial and social value, were early investors in Equitas and active in its governance. (Another Caspian-backed microfinance firm, Bengaluru-based Ujjivan Financial Services Ltd., the fourth-largest microfinance lender in India by assets under management, raised approximately Rs 900 crore in an initial public offering that opened on April 28 and was nearly 41 times oversubscribed as of closing on May 2, 2016.) Given this market activity, we at Caspian and Grassroots Capital Management PBC, who work together closely on this and other investments, are prompted to take a closer look at what this IPO means for the company, its clients, and the industry.
The performance of Equitas as a leading and responsible lender is as much driven by its solid fundamentals as its careful product design and human resource practices, the “hardwiring” of its social commitment, and its client-centric practices.
Founded in 2007 to provide the underserved and disenfranchised people of Tamil Nadu with reasonably and transparently-priced microcredit, the Equitas company diversified after the microfinance crisis in 2010 into affordable housing, small and medium enterprise (SME) and vehicle loans. Traditional microlending now makes up only slightly more than half of the total portfolio. In September 2015, Equitas was one of ten companies to receive in-principle approval from the Reserve Bank of India (RBI) for the Small Finance Bank (SFB) license.
Since inception, Equitas has been one of the fastest, if not the fastest, growing company in the Indian financial inclusion sector. Only two years after its launch, Equitas was serving one million clients. As of December 2015, it had nearly 3 million clients, a gross loan portfolio of US$800 million, and a return on equity (ROE) of around 13 percent. Equitas’ rapid growth was driven by investments in technology, a focus on efficiency, a steadfast commitment to governance and transparency, and a set of unique social policies: a cap on interest rates of 26 percent even before rates were subject to regulatory caps; an informal cap on ROE of around 20 percent; a cap on CEO salary of 40x the lowest paid employee; and an annual 5 percent allocation of company profits to social programs. Managed by a separate trust, these social programs were an essential part of the company’s operations, and Equitas was at the forefront of measuring outcomes, most recently participating in efforts by Freedom from Hunger and the Microcredit Summit Campaign to integrate microfinance and health. Equitas was certified for strong client protection practices by the Smart Campaign, and CEO H.K.N. Raghavan appears in this video commenting on the value of certification.
The IPO on April 7 was the largest “only” domestic Indian IPO in the banking and financial services industry and the first to be oversubscribed without any foreign participation.
Intended to bring down the foreign shareholding from 93 to 49 percent to meet the RBI’s requirements for a SFB license, the price band was Rs 109-110 per share. The attractive price galvanized investor demand, which was over 17 times the offered shares with strong interest from all categories of investors. The institutional investor category was subscribed nearly 15 times; the retail and high net worth individuals (HNIs) categories were subscribed 1.4 times and 57.3 times, respectively. From a responsible exits perspective, the attractive pricing of Equitas shares, the high domestic demand and the high participation of retail investors make it a model, with pricing in line with the underlying business and client base compared to the overvaluations that prevailed before the Indian microfinance crisis and that characterized previous IPOs.
The stock continued its robust performance when it opened to international buyers on April 21, and closed on April 28 at Rs 139 and is continuing to outperform other listed stocks. By way of context, the S&P Bombay Stock Exchange Sensitive Index (S&P BSE Sensex) has had a soft year, with 5.5 percent decline.
This solid performance of Equitas stock offers convincing evidence that the Indian financial inclusion sector has rebounded from the liquidity crunch following the 2010 Andhra Pradesh crisis. However, for pure financial investors like conventional private equity or VC funds, Indian press speculated that the returns may not be “satisfying, especially when compared with the returns they get from sectors such as information technology.”
What Does This Mean?
This question gets to a core issue for Grassroots and Caspian: how can social and financial returns be balanced to deliver on the promise of the “double bottom line” and demonstrably build impact investing as an alternative to conventional investing? As we have argued in several blogs and papers, profit vs. impact choices may arise when managing a “social” business, particularly one with poor or vulnerable people as the primary clients or suppliers.
For example, Equitas could have decreased or eliminated its allocation to health and other social programs to increase its financial bottom line, especially during the immediate aftermath of the Andhra Pradesh crisis, when many microlender’s returns were under severe pressure. However, one of the main reasons founder Vasudevan launched Equitas – and why Caspian and Grassroots have been dedicated supporters – was to improve the quality of life of those who don’t have access to formal financial and related services. The social programs were an integral part of the company’s mission and corporate culture. Vasudevan ensured that each investor was aware of and committed to the profit allocation before making an investment. Likewise, the decision to diversify its business from microcredit into related financial products was driven by both the need to mitigate risk and the desire to be true to mission and more comprehensively meet client needs. Indeed, these new business lines typically have lower margins than microloans. Vasudevan himself doesn’t act like a typical commercially-minded bank CEO, voluntarily capping his own salary and keeping his share of the company at only 3 percent.
Grassroots calls these features – like caps on ROE, interest rate, and salary and profit allocation – “hardwiring” the social mission. Combined with operating discipline, innovative product and process design, and agile use of technology, these policies created the value proposition that motivated the Caspian funds’ early investments in Equitas and they have helped drive consistently robust returns, both financial and social.
The Future Looks Bright…
The Equitas IPO is, to date, a solid success for shareholders and the Indian financial inclusion sector. However, as an upcoming Grassroots paper will discuss, there are factors that distinguish this IPO from others, including the unique policies of the company itself. In addition to the social aspects outlined above, Equitas’ diversified portfolio, professional management, and dedication to transparent and qualified governance set it apart from many other so-called “social” or “impact” companies, enabling Equitas to obtain the SFB license.
The operating environment has also experienced a significant overhaul since the SKS IPO in July 2010 and the Andhra Pradesh MFI crisis that began in October of that same year. The industry has rebounded and grown on the basis of a credit bureau infrastructure and strengthened regulatory framework, and with measures in place to protect consumers and their well-being.
Nevertheless, questions linger about the large amount of investment coming into the sector, the valuations and expected returns and, therefore, the required growth rates, and the dangers of irresponsible lending and overindebtedness. Client protection and responsible growth should always be at the forefront of any industry dealing with the poor and vulnerable. The response to the IPO suggests that Equitas’ emphasis on clear corporate priorities in dealing with underserved and vulnerable clients, client protection, and responsible growth have positioned it well for continued success. The Equitas IPO sets a standard of transparency and double bottom line corporate behavior, brings visibility to the financial inclusion agenda and the broader impact investing sector, and introduces a wide range of investors to impact investing.
Image credit: Accion
Page 1 of 3912345...102030...»Last »