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World Bank Reports That Microcredit Works After All

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The World Bank has released a report that examines microfinance in Bangladesh over the longest period yet studied. The results were quite positive:

The results of the basic model unequivocally show that group-based credit programs have significant positive effects in raising household welfare including per capita consumption, household non-land assets and net worth. Microfinance increases income and expenditure, the labor supply of males and females, non-land asset and net worth as well as boys’ and girls’ schooling. Microfinance, especially female credit, also reduces poverty. The results using long-panel data thus confirm most of the earlier findings that microfinance matters a lot, and more for female than for male borrowers.

….Membership in multiple programs has grown steadily from none to 33 percent in 2010/11….Trading is perhaps now saturated with microcredit loans and households have already started to experience diminishing returns. In such circumstances, households must be assisted through skill training and the development of improved marketing networks to expand activities in more rewarding sectors and beyond the local economy; otherwise, microfinance expansion cannot be sustained. In short, the current microfinance policy of credit expansion alone may not be enough to boost income and productivity, and, hence, sustained poverty reduction.

“Examining the dynamics of microcredit programs in Bangladesh” uses long panel survey data spanning over 20 years to study the effects of microcredit programs in Bangladesh. It uses a dynamic panel model to address a number of issues, such as whether credit effects are declining over time, whether market saturation and village diseconomies are taking place, and whether multiple program membership, which is rising as a consequence of microcredit expansion, is harming or benefiting the borrowers. The paper makes the following observations:

•          Group-based credit programs have significant positive effects in raising household welfare including per capita consumption, household non-land assets and net worth;

•          Microfinance increases income and expenditure, the labor supply of males and females, non-land asset and net worth as well as boys’ and girls’ schooling;

•          Microfinance, especially female credit, reduces poverty;

•          Past credit has a higher impact on income and expenditure than current credit;

•          With higher village-level aggregate current male borrowing, the marginal effect of male borrowing on per capita income gets lower.

The paper concludes that the current microfinance policy of credit expansion alone may not be enough to boost income and productivity, and, hence, sustained poverty reduction.

Commercial Credit and Finance PLC receives Rs. 1.68 billion from Creation Investments: the Largest International PE Investment into a Sri Lankan LFC

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Leading frontier markets private equity investor, Creation Investments Capital Management LLC (“Creation”), through its wholly owned subsidiary, Creation Investments Sri Lanka LLC (“Creation Sri Lanka”), has agreed to invest Rs. 1.68 billion (US$12.4 million equivalent) into one of Sri Lanka’s leading finance companies, Commercial Credit and Finance PLC (“CCF”). The transaction will involve the issuance of 80 million new shares for a consideration of Rs. 1.68 billion or approximately 25.15% of CCF. The transaction has received the necessary CBSL, SEC and CSE approvals and will be completed subject to shareholder approval.

 

This is the largest investment by an international private equity fund into a publicly listed Sri Lankan licensed finance company and is a strong validation for the success of CCF. Creation is impressed by the strength of CCF’s leadership and commitment to the mission toward serving the under-banked population in Sri Lanka. The offered price at a significant premium to the trading value and NAV indicates strong future growth potential for the company. The new funds will be used by CCF for its future investment activities including further enhancing its branch network and expanding its asset and client base, and to meet the future capital adequacy requirements of the Company.

 

Creation has invested in many banks and finance companies across emerging markets and its investment into CCF will help provide guidance and support to CCF and promote best practises from its other international portfolio investments. The new equity investment will also strengthen the capitalisation of CCF and enable it to access international debt capital at attractive rates.

 

York Street Partners (Pvt) Ltd. acted as Sole Financial Advisor to the transaction. Varners was the Legal Advisor to CCF and FJ&G De Saram was the Legal Advisor to Creation.

 

Roshan Egodage, CEO of CCF, commented on the transaction, “we are committed to providing a wide range of financial products to the Sri Lankan consumer including a variety of microfinance and SME products combined with a high quality service which is part of our core values. Our partnership with Creation will enable us to continue this journey and grow the company towards becoming Sri Lanka’s leading licensed finance company”.

 

Patrick Fisher, CEO of Creation, added that “this is our first investment in Sri Lanka and the largest investment that we have made to date across our Creation Investments Social Venture Funds. We look for quality investment opportunities across many emerging and frontier markets globally. CCF exemplifies what we look for in prospective investments – market leadership, exceptional management, and alignment in the mission, vision and values. CCF is a leader in the Sri Lankan LFC sector given its tremendous growth in the past few years. We are excited to partner with the CCF team in supporting their future growth plans”.

 

“This was a complex transaction that required careful negotiation through several structured options as well as regulatory approvals”, Sujendra Mather, MD at York Street Partners said reflecting on the transaction. He further added, “we are delighted to see the successful outcome of this transaction which is truly a win-win for both CCF and Creation and comes at an opportune moment when several key changes are taking place in the financial services landscape in Sri Lanka”.

 

About Creation Investments Capital Management LLC

Creation Investments Capital Management LLC is a Chicago-based private equity firm founded in 2007 with over US$130 million under management. Its investor base includes Fortune 100 Banks, Insurance Companies, Hedge Funds and High Net Worth Individuals. Creation has invested in a number of financial services companies in emerging markets such as India, Mexico and Russia.

 

About Commercial Credit and Finance

Commercial Credit and Finance PLC is one of Sri Lanka’s leading finance companies with an asset base of Rs. 24.5 billion as at December 31, 2013 and is listed on the CSE. CCF has a wide range of financial products including an innovative portfolio of SME and Micro SME products which are distributed to over 400,000 customers through 60 branches across the island. CCF has a rating of BB+ from RAM Ratings.

 

 

Creation Investments to invest Rs. 1.68 b in Commercial Credit for 25% stake – Financial Times

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Commercial Credit and Finance (COCR) yesterday announced that the Board of Directors has approved the investment of Rs. 1.68 billion in the company by way of a private placement of shares at Rs. 21 per ordinary voting share.

US Delaware incorporated Creation Investments Sri Lanka LLC will be the company to which shares are to be allotted. The move has been approved by the Central Bank and the Securities and Exchange Commission but subject to shareholder consent.

The purpose of the issue is to meet the future capital adequacy requirements and for its future investment activities.

The maximum number of shares to be issued is 80 million voting shares (25% stake eventually) via two tranches. The first will be 48 million shares for a consideration of Rs. 1.008 billion and the second tranche will amount to 32 million shares for a value of Rs. 672 million, before March 2015.
Major shareholder of Commercial Credit and Finance is BG Investments Ltd with a 78% stake whilst Mrs. Vagdevi Fernando holds 7%.  Company has 238 million shares in issue at present. Share price closed at Rs. 16.10.

 

http://www.ft.lk/2014/01/31/us-registered-firm-to-invest-rs-1-68-b-in-commercial-credit-for-25-stake/

Microfinance as a Tool to Alleviate Poverty – Forbes

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For millions of people without access to traditional banking, the internet is a lot more than a place to share the latest family photos. It’s an opportunity to tell their stories and gain access to small loans that can change their lives.

Just 10 percent of the global population has access to traditional banking, according the Gates Foundation. To bridge the gap, microfinance institutions step in. Microfinance entails loans of as little as $25 to unemployed or low-income individuals or groups who would otherwise have no other means of gaining financial services, providing low-income people with opportunities to become self-sufficient.

Back in 1974, a Bengali man named Muhammad Yunus created the concept of microfinance with Grameen Bank, winning him the Nobel Peace Prize in 2006 for the dramatic global impact of his idea. The World Bank estimates that more than 500 million people have benefitted from microfinance to date.

Different than charity, these loans are repaid to the individual lenders. Since 2005, Kiva, a person-to-person microlending organization, has provided more than $329 million from 786,000 lenders in 62 countries, with the astonishing repayment rate of 98.97 percent. Borrowers are able to tell their stories online, along with details of their business idea – say, opening a shop or buying materials to make goods by hand.

Kate Cochran, COO of education microlender Vittana, notes the ripple effect these small loans can have across entire families and even generations. “In India, an education can increase earning power by 200 to 300 percent. In many cases, siblings are able to pay for younger brothers and sisters to complete their education with that extra income, and the upward cycle repeats.”

The Dell Foundation also supports and funds microfinance, with a focus on promoting family economic stability by working to increase the number of high-caliber Microfinance Institutions (MFI) in urban communities through Ujjivan. Other microfinance organizations include ACCIONMicroplace, and Grameen America. Many MFI’s also offer microloans in the U.S. for entrepreneurs with solid business plans but who don’t qualify for traditional bank loans.

Global Philanthropy Group partner Maggie Nielson, who helped develop and implement the United Nation’s Year of Microcredit  program in 2005, sums it up nicely: “People just want access to the same financial tools we have so that they can help themselves. They don’t want someone else to build them a big project or give them a handout. They are perfectly capable of creating their own success even though they weren’t born into the same circumstances. That is the kind of assistance anyone can give. You can literally change someone’s life.”

Sequoia Capital bets on another microfinance player

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Bangalore Feb 02, 2012

After backing SKS Microfinance, Sequoia Capital is now betting on another microfinance player, Bangalore-based urban poor-focused Ujjivan Financial Services, a member of the Grameen Network, Bangladesh. Sequoia Capital on Wednesday said it had participated in the fifth round of equity financing by Ujjivan, and was now the single-largest shareholder, with a stake of around 15.7 per cent.

It added it had raised Rs 127.9 crore ($25.5 million). Two new foreign institutional investors (FIIs), FMO (Netherlands Development Finance Company) and WCP Mauritius Holdings III (Wolfensohn Capital Partners), along with current investors, participated in this round. The existing investors are Lok Capital, Unitus Corporation, Elevar Equity, Caspian Advisors, besides Sequoia. With the latest round of fund raising, private equity funds have invested a total of Rs 230 crore and hold 83 per cent in the company. The promoters group, led by Samit Ghosh, managing director, Ujjivan, hold around four per cent and has so far disbursed Rs 2,800 crore.

Mohit Bhatnagar, managing director, Sequoia Capital, said India continued to be a preferred investment destination for FIIs and it was heartening to see fundamentally strong organisations in the microfinance sector were a key focus. Samit Ghosh said, “We thank our existing investors who continue to reiterate their commitment to us and welcome our two new investors. This round of equity funding will make Ujjivan one of the best capitalised MFIs in the country”. With this round of equity funding, the last being in 2009, Ujjivan’s capitalisation has more than doubled to Rs 230 crore. Kotak Investment Banking was the advisor and arranger of the transaction.

 

Sanjiv Kapur, managing director, Wolfensohn India Advisors Pvt Ltd, said, “This is the first investment for Wolfensohn in the Indian microfinance sector, endorsing our faith in the sector and in Ujjivan’s financial inclusion model.” Sudha Suresh, Ujjivan’s chief financial officer said the additional capital would help increase the loan book from the current Rs 600 crore to around Rs 1,600 crore, given the Reserve Bank of India’s 15 per cent capital adequacy requirement for MFIs that are non-banking financial companies.

“We are very happy to work with Ujjivan, which is constantly searching for ways to better serve the urban poor. Their firm focus on their mission to alleviate poverty and strong business credentials make Ujjivan a very interesting partner for FMO” said Keesjan de Kruijf, senior investment officer, FMO.

“When we look for large MFIs which are truly client centric, transparent, have good systems, great leadership, and are sincere in its social objectives, Ujjivan is the only MFI which comes to our minda. Our investment is built around making it the borrower of choice for the base of the pyramid, across the country”, said Venky Natarajan, managing partner, Lok Capital.

Ujjivan serves over a million clients in 20 states and 49 under-banked districts across the country.

Recently, Ujjivan received the ‘Microfinance Organisation of the Year’ award and was ranked No1 in the microfinance industry as the best company to work for in India.

Road Map for the Microfinance Industry: Reaffirming Responsible and Client-Centered Microfinance

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From the Microfinance CEO Working Group, January 2012

In less than 40 years, microfinance has spread around the world, today providing access to credit and other financial services to more than 205 million poor clients1, most of whom were previously ignored by mainstream financial institutions. From modest roots, microfinance has built a global network of institutions dedicated to serving low-income people. It has transformed our understanding about the power of opportunity.

In early 2011, a group of CEOs from microfinance organizations that work globally began to have regular, informal conversations about the future of the microfinance sector as it matures and faces new challenges. We found that we shared many of the same values and concerns, including a desire to work together to help improve our organizations and advance the industry. From these conversations emerged the Microfinance CEO Working Group (described further below).

Those values and concerns have led the Working Group to adopt a shared approach to the future of microfinance, which this paper outlines, and to urge others to endorse this approach.

The Challenges: Client Focus and Responsible Finance

As leaders in the microfinance industry, we applaud the achievements of microfinance practitioners around the world. Every day, legions of committed, passionate individuals rededicate themselves to their work in support of helping millions (and ultimately billions) of people gain access to financial services. We believe deeply that microfinance is a powerful tool for improving the lives of the poor and that the field has not yet reached its full potential. The number of poor people who could benefit from financial services is staggering: by some estimates, as many as 2.7 billion people in developing countries are unbanked2. The microfinance industry has much more work to do. However, in order for the industry to continue to serve as a vital and creative force in the world, it must recognize and actively address several issues that are crucial to its continued success.

First, the microfinance industry must raise its standards of responsibility to clients. For many years, microfinance organizations emphasized the twin objectives of achieving scale and financial sustainability. At times, in the focus on growth and institutional development, client interests were subordinated to the achievement of financial objectives. Furthermore, new forces were introduced as the industry grew, such as increased competition for clients in some saturated markets and the entry of players that lacked a genuine social-mission orientation. Problems of client over-indebtedness in a number of markets (India, Bosnia, Nicaragua, and Morocco, among others) have received substantial media, political, and in some cases regulatory attention, with repercussions for the larger microfinance community. To ensure greater focus on client benefit and prevent future problems, microfinance needs to develop robust practices to protect, effectively serve, and support clients. The industry needs high-quality and standardized principles and procedures that ensure ethical, transparent business and client safety.

Second, the sector must create real, measureable, social and economic value for clients.For too long, many microfinance organizations have relied on credit as their primary product offering. Recent research demonstrates that the poor live far more complex financial lives than previously assumed. While microcredit is a compelling tool that has helped millions grow their businesses and establish more stable lives, it is clear that clients need a range of services, such as savings and insurance. To effectively support people as they work to improve their lives, microfinance institutions (MFIs) should aspire to offer a broader array of products and services that are tailored to meet client needs. And they need to actively manage their social performance in order to hold themselves accountable for achieving the results they seek.

We envision a microfinance industry that protects its clients, is transparent, and measures and achieves social outcomes and impact.

Advancing Industry Standards Inside and Out: The Three Key Initiatives

We believe that careful, systematic efforts to improve our performance are vital. These efforts must span numerous fronts, including developing strong consumer protection practices and meaningful measures of transparency, and establishing industry standards for social performance. In this vein, we have focused our initial efforts on promoting and supporting three existing initiatives working to raise standards across the microfinance industry: the Smart Campaign, MicroFinance Transparency, and the Social Performance Task Force’s universal standards for social performance management.

All three of these initiatives are working to put in place an architecture that will assist the industry to reach and maintain its highest goals and standards. Each has made important initial accomplishments, and each will need full industry support in order to achieve its potential.

  • The Smart Campaign is an unprecedented effort to make client protection part of the DNA of microfinance. Declaring that “protecting clients is not only the right thing to do; it’s the smart thing to do,” the Campaign supports institutions as they ensure that they treat clients fairly and respectfully, and avoid the harm that improper use of financial products can sometimes cause3. The Smart Campaign assists the industry to integrate the widely endorsed Client Protection Principles thoroughly into practices at all levels. This year, the Smart Campaign will be piloting its certification program, through which institutions can demonstrate their adherence to the Client Protection Principles via third-party verification. The Smart Campaign has been endorsed by more than 2,400 microfinance organizations, investors, and individuals in 130 countries – reaching organizations that serve more than 40 million people.
  • MicroFinance Transparency focuses on moving microfinance to full pricing transparency. It has published detailed information on pricing by 317 microfinance institutions in 12 countries, representing more than 36 million client loans in all, with 14 additional countries forthcoming4. MFTransparency provides a public forum for MFIs to demonstrate their commitment to transparency and integrity, and serves as an important resource for comparative information for investors, regulators, and eventually, clients. MFTransparency also provides training and advice to ensure that disclosure strengthens the microfinance industry overall. Since 2008, nearly 900 industry leaders have endorsed MFTransparency’s work.
  • The Social Performance Task Force (SPTF) is a collective effort by more than 1,000 industry stakeholders to develop common tools for measuring social performance and mission fulfillment5. Subscribing to the belief that you can only manage what you measure, the SPTF aims to support microfinance organizations to effectively translate their social missions into reality. This ambitious initiative is in the process of developing “universal standards for social performance management” for MFIs and will ultimately establish benchmarks for performance measurement and management.

Over the past several months, the Microfinance CEO Working Group has worked to engage with each of these initiatives. We have urged the three initiatives to work more actively with each other in a smoother, more coordinated fashion. We have provided detailed feedback to the SPTF Steering Committee on the proposed universal standards and on the strategic direction of the SPTF going forward. We have met with Smart Campaign representatives for an in-depth discussion on the Campaign’s proposed certification program, in order to provide feedback and learn how our own organizations and affiliates can become involved. We are tracking our organizations’ participation in each initiative, as a challenge to one another to deliver on our word.

While we believe that these initiatives hold significant potential for the industry, we also continue to seek out and encourage exciting new ideas that hold power for the future. We note that there are other promising industry-wide initiatives under development, and we will comment on, endorse, and urge others to support some of them in due course. We also recognize that other networks of microfinance advocates and practitioners are proposing new standards and actions that are constructive steps, such as the Paris Appeal for responsible microfinance6, and the Seal of Excellence for Poverty Outreach and Transformation in Microfinance7.

As members of the Microfinance CEO Working Group, we commit to embed the principles and practices of the three initiatives into our own networks. But while our organizations’ networks collectively serve tens of millions of clients on five continents, we by no means represent microfinance as a whole. We call on our valued peers and colleagues throughout the industry to endorse these three initiatives and to accelerate their adoption within their own organizations.

At this moment, microfinance has an opportunity to build on past successes, learn from, and respond to the challenges it faces in order to be a more responsive, responsible, and transformative industry. By taking sincere and systematic action, we can build more successful financial institutions that help change the lives of the people we serve.

We welcome comment and feedback from the greater microfinance community and beyond.

Signed,

Michael Schlein, President and CEO
ACCION
David Simms, Board Chair Opportunity International Network
Rupert Scofield, President and CEO
FINCA International
Rosario Pérez, CEO Pro Mujer
Steve Hollingworth, President
Freedom from Hunger
Scott Brown, President and CEO VisionFund International
Alex Counts, President and CEO Grameen Foundation USA Mary Ellen Iskenderian, President and CEO Women’s World Banking

Accion, Finca, Grameen Foundation, Freedom from Hunger, Opportunity International, Pro Mujer, Vision Fund, WOmen's World Banking Logos

 

About the Microfinance CEO Working Group

The members of the Microfinance CEO Working Group believe that strengthening microfinance requires a unified voice and systematic change. Currently, members include ACCION, FINCA International, Freedom from Hunger, Grameen Foundation USA, Opportunity International, Pro Mujer, VisionFund International (World Vision’s microfinance arm), and Women’s World Banking. Initially convened by Asad Mahmood of Deutsche Bank, we have found inspiration in talking with each other about the obstacles facing the industry and each organization’s response. The group meets monthly, either in person or via phone, to discuss major issues and opportunities facing our organizations. The group has selected Rupert Scofield, CEO of FINCA International, and Mary Ellen Iskenderian, CEO of Women’s World Banking, as co-chairs. The Working Group is currently housed at the Center for Financial Inclusion at ACCION.

Though our approaches to microfinance vary in their implementation, all our organizations share the common goal of bringing financial and related services to those who have been traditionally excluded, helping them create new opportunities and better livelihoods for themselves and their families. These central tenets guide our thinking:

Collaboration is powerful. Working together, we are able to share concerns, find commonalities, and develop collective responses. We seek to speak with a cohesive voice, offering potent support to the most important solutions. We believe that drawing together with other microfinance industry groups to jointly advocate for responsible microfinance practices will strengthen the quality and impact of client services.
We must translate language into practice. Microfinance organizations need to go beyond declarations of commitment and develop the processes and procedures that transform those words into reality. This starts with us: Working Group members are committed to raising the standards of our networks and becoming an example to others.

The group has come together to respond swiftly to microfinance issues as they arise, providing a coordinated response to pressing challenges. We serve as a network of peers, sharing concerns and successes. We aim to learn from one another and continually identify ways to strengthen our organizations. We seek to identify and celebrate inventive ideas that offer the potential to improve microfinance’s reach and impact. And we support the dissemination of industry-wide standards and practices, focused on client needs, which will lay the groundwork for years to come.

If you have any questions or comments, please contact Meghan Greene, manager of the Microfinance CEO Working Group, at mgreene@accion.org

The Year of Controversial Giving – Philanthrocapitalism in 2012

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What does 2012 have in store for giving, especially the impact-driven approach to it we call “philanthrocapitalism”? Having peered into our philanthrocrystal ball, we see giving becoming more dangerous, more controversial, and more political, among other things, as philanthrocapitalists find themselves at the centre of some of the year’s biggest news stories.

Here are our 10 predictions for the coming year:

1. Greater scrutiny of the 1 percent. The role of the rich in setting the political agenda is going to be one of the big stories in the run-up to the U.S. presidential election in November. Philanthrocapitalists hungry for impact are increasingly looking to get leverage by influencing government policy, and this election will set the policy agenda for the next four years at a time when America (and, along with it, the world) faces some tough choices. We have been here before, of course, with George Soros’ support for the “Move On” campaign in 2004, which was ultimately unsuccessful in unseating the incumbent president, George W. Bush. The influence of the Koch brothers on the right is already on the media’s radar, but there are plenty more to be discovered. Expect donors of the left and the right to pitch in to this contest using political donations and philanthropic giving to support policy thinking on issues like budget priorities and health care and school reform. Is this philanthropy or plutocracy? We will all be talking about that this year.

2. Nation building is back. Politics will also be a big theme of philanthropy around the world, which may bring with it genuine danger for those involved. From the nations involved in the Arab Spring to Vladimir Putin’s (for now) Russia, and maybe even North Korea, philanthropists are going to be getting involved far more than in recent years in supporting civic movements and even political movements in countries where there is a real opportunity to change the political balance, hopefully in a more democratic and just direction. As the year-end crackdown on various American-backed nonprofits by Egypt’s military government should remind everyone involved, those threatened by this philanthropy are unilkely to take foreign interference in their countries lying down.

3. Crunch time for Muslim philanthropy. On a related point, 2012 is going to be a year of decision for Muslim philanthropists. There is a huge opportunity for them to strengthen civil society in the Arab Spring countries and work with the emerging entrepreneurs and social entrepreneurs there. Pakistan and Afghanistan are both in need of high-impact philanthropy. Yet with the honorable exception of the Aga Khan Foundation, too much of the giving from Muslim donors, including by some of the multi-billion-dollar foundations set up by the rulers of Gulf countries and their leading businesses, is still focused on traditional welfare and charity rather than social change. Yet change seems likely to happen with or without them, and if they do not help it along, it may well be at the expense of the Muslim wealthy. Perhaps this is an area where Turkey’s emerging philanthrocapitalists will show a lead to the rest of the Muslim world.

4. Occupy philanthropy. One of the big questions of the year will be whether the global Occupy movement will evolve from a necessary voice of protest into an effective force for change. There is an opportunity, and we believe an obligation, for philanthrocapitalists to help reform capitalism, so that it genuinely works in the interest of the population as a whole, not just a small subset of it. Andrew Carnegie understood the vulnerability of capitalism to the perception of it being inherently unfair; it is time today’s successful capitalists did so, too. The gradually increasing pack of CEOs who get it, such as Indra Nooyi of PepsiCo, Paul Polman of Unilever, and Sir Richard Branson of Virgin, have a huge opportunity to set the agenda for their peers, as long as they back up their words with serious action.

5. Steve Jobs, philanthropist. After spending his life being fairly dismissive of philanthropy, the late co-founder of Apple is likely to be one of the most prominent additions to the mega-giving scene in 2012. His widow, Laurene Powell Jobs, has long been involved in giving, having founded an organisation to get students from poor backgrounds into college, participating in the Clinton Global Initiative and Global Philanthropy Forum, and visiting Africa on a trip for philanthropists led by Ben Affleck. Now that she controls her late husband’s fortune, expect her to start putting it to good use.

We can also look forward to some weird and wacky philanthropy from new donors from the social media generation. The Facebook IPO is going to make a lot of people very rich and, since its founder Mark Zuckerberg has already signed up to the Giving Pledge, we are hopeful that the new cohort of wealthy will turn to philanthropy as a priority. The most entertaining philanthropist of 2011 was Silicon Valley venture capitalist Peter Thiel, who famously/notoriously offered $100,000 grants to get people to drop out of college and start a business, as well as supporting efforts to create new floating countries in international waters (“sea steading”) and launching a science fund closed to university academics, a large proportion of the people we normally think of as scientists. Plenty of people think Thiel is nuts, which is great. Too much philanthropy today talks about risk-taking without being willing to court controversy. Expect the donors of the social network generation to have no such fears.

6. Celanthropy’s new stars. Ben Affleck will become more prominent on the Hollywood philanthropy scene, though probably still lagging behind the likes of Brangelina, George Clooney, and Matt Damon. The celanthropist to watch, though, will be Lady Gaga, who we expect to take a big step forward in her giving, probably with a cause dear to the hearts of her “Little Monsters” (as she calls her young fans). Another celanthropist worth watching will be Ashton Kutcher, to see if he can recover as a force for good following a messy divorce and some unfortunate tweeting in 2011. Despite his and other bad celebrity experiences, the use of Twitter and other social media in philanthropy will continue to increase — which should mean even more celebrity mishaps this year.

Some giving dynasties will also move more clearly into the limelight. Will Chelsea Clinton, as well as championing social causes in her new TV job, take a bigger role at the Clinton Global Initiative? Expect greater interest to be taken in Barbara Bush, daughter of George W., and her health care nonprofit, Global Health Corps. And now that he is focusing on philanthropy, expect some bold initiatives from Howard Bufffett, grandson of Warren Buffett. Also watch out for the House of Windsor, as Britain’s Brangelina, Wills ‘n’ Kate, make a serious effort to build a celanthropic brand, hopefully learning from the ability of Princess Diana to draw attention to an issue and the underrated skills of Prince Charles as a social entrepreneur.

7. Deep impact. This will be a big year for “impact investing,” which explicitly seeks both financial and social/environmental returns. So far, there has been much more talk than action, but the time has come for the money to back the ideas. The Omidyar Network has already taken a lead, but some other big philanthrocapitalists will join it this year. Enter the Gates Foundation?

8. The great extinction. Alas, it is going to be a tough year for many nonprofits. We are braced for more scandals about inspiring narratives unsupported by facts, along the lines of the 2011 Greg Mortenson exposé. The pain of government spending cuts will be felt widely, both directly, as many nonprofits rely on money from government, and indirectly, as cuts to government services will lead to greater demand pressure on non-government alternatives. We think that many nonprofits will be faced with serious shrinkage and, in many cases, extinction. Our hope is that smart donors will grasp the nettle and try to manage this culling process, encouraging mergers wherever possible, so that the best of the nonprofit sector is preserved or, better still, made stronger.

9. Philanthrocapitalism the Chinese way. There was some schadenfreude when the Gates-Buffett visit to China in 2010 failed to drum up new signatories to their Giving Pledge, although that was not the immediate goal of their mission. We expect philanthrocapitalism to become an increasingly important force in China in 2012, though it will have a distinctive local flavor. Instead of traditional, American-style, foundation-oriented philanthropy, we expect a wave of stories about corporates playing a key role in solving social and environmental problems through a version of “social investment.” China is now hitting a difficult stage of economic development when it needs to manage its use of natural resources, stop competing on low labor costs alone, start tackling potential drags on its competitiveness, such as its rapidly aging population, and deal with rising expectations among the populations. All of this requires a wave of innovation, which China’s philanthrocapitalists are well placed to lead.

10. Some good news. We are hopeful for some big breakthroughs that will prove that philanthrocapitalism works. Will some of the few remaining countries still hit by polio announce that they are free of the disease? Will the death toll from malaria plunge even further and faster? We think so, and that as it does, it will validate the “posse” approach to solving the world’s problems at the heart of philanthrocapitalism. Expect more new posse partnerships to be announced, similar to the Malaria No More campaign led by Ray Chambers, which has galvanized a powerful coalition of the willing. This is a time of growing scepticism about the effectiveness of government, international aid, and even of giving. Yet clear evidence of results may start to change the mood and persuade a growing number of people that philanthrocapitalism is worth the risk.

Matthew Bishop and Michael Green are co-authors of Philanthrocapitalism: How Giving Can Save the World. Bishop is New York Bureau Chief of The Economist; Green is an independent writer and consultant.

Creation Investment Social Ventures Fund I Announces a Final Fund Closing of $32 million in Committed Capital

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FOR IMMEDIATE RELEASE

Creation Investment Social Ventures Fund I Announces a Final Fund Closing of $32 million in Committed Capital

CHICAGO, IL – January 14, 2010 – Creation Investments Social Ventures Fund I, a global Microfinance private equity fund, completed its final closing on December 15, 2010 with total committed capital of $31.8 million USD. The Fund’s investor base is composed of 74 US and European institutional investors along with many family offices and high net worth individuals. The Fund is governed by an independent Board of Directors and managed by Creation Investments Capital Management, LLC, headquartered in Chicago, Illinois.

To date, the Fund has deployed over half of its committed capital, making equity investments in five Microfinance Institutions (MFIs) and Small-and-Medium Enterprise Lenders in Latin America and Central and Eastern Europe. Specifically, portfolio holdings include: Aspire, S.A.P.I. de C.V. SOFOM E.N.R. (Mexico); MicroCred Mexico, S.A.P.I. de C.V. SOFOM E.N.R. (Mexico); Opportunity Albania (Albania); Inicjatywa Mikro (Poland); and Forus Bank (Russia). The Fund Manager co-led the establishment of CEE Microfinance Holdings, N.V. which manages the Fund’s three holdings in Central and Eastern Europe.

Each of these institutions is committed to providing financial services to under-banked individuals and businesses in its respective geography, helping to facilitate economic development and poverty alleviation. Beyond enterprise lending, several of the Fund’s portfolio companies offer micro-insurance, micro-savings, and other remittance services. As of November 30, 2010, the total aggregate loan portfolio is $95 million USD with over 30,000 active borrowers.

Creation Investment Social Ventures Fund I targets growth equity investments in early stage, high potential MFIs, as well as buyout equity investments in more mature MFIs transitioning out of NGO ownership. The Fund Manager seeks to add value and achieve greater scale through active management, in-market consolidation, and expansion of the financial product offering. The Fund aims to hold significant equity investments in three major geographic regions – Latin America, Asia, and Eastern Europe – resulting in a diverse, global portfolio in core emerging markets.

The Creation Investment’s team, led by Patrick Fisher and Ken Vander Weele, has proven their ability to originate unique impact investment transactions, recruit seasoned management for portfolio companies, access debt capital to fund growth, deliver technical assistance and technology to enhance systems, maintain a focus on client protection principles as a Smart Campaign member, and add value through active involvement in all levels of the business.

“We are excited to have brought sophisticated, private sector investors to a new asset class providing them with the opportunity to maximize their financial and social returns through robust impact investments” said Patrick Fisher, CEO and Co-Founder of the Fund Manager.

About Creation Investments Capital Management, LLC:
Creation Investments is an alternative investment management company committed to fighting global poverty through direct, for-profit investments in businesses which promote economic development. Creation Investments Capital Management, LLC manages and sponsors impact investment funds and one-off investments in social ventures, seeking to maximize financial and social returns on investment. For more information, go to: http://creationinvestments.com/

http://www.prlog.org/11221631-creation-investment-social-ventures-fund-announces-final-fund-closing-of-32-million.html

dfe Partners and Creation Investments Establish CEE Microfinance Holdings, as a Regional Holding Company and Complete 3 Acquisitions

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Combined Talent from Financial Services and Microfinance Join to Expand Microfinance Services Throughout Central and Eastern Europe

DATELINE, September 23rd, 2010 – CEE Microfinance Holdings, N.V., a new, private equity backed, Dutch holding company owned by the Balkan Financial Sector Equity Fund, managed by the Swiss based dfe partners, and Creation Investments Social Ventures Fund I, managed by US based Creation Investments Capital Management, announced today it purchased three microfinance institutions located in Central and Eastern Europe. CEE Microfinance Holdings has a newly recruited management team which combines talent from the financial services industry both inside and outside the microfinance sector.

The three microfinance institutions involved in the transaction are located in Albania, Poland, and Russia and purchased from, U.S. based Opportunity Transformation Investments Inc., UK based Opportunity Microfinance Investments Ltd and FORA Fund (Russia).    The first institution, Opportunity Albania is a non-bank financial institution currently serving more than 16,000 clients from its 23 branches, with its headquarters in Tirana, Albania.  The second, Inicjatywa Mikro is a non-bank financial institution currently serving more than 2,000 customers, with its headquarters in Krakow, Poland. The third, FORUS is a registered bank in Russia currently serving more than 10,000 customers, with its headquarters in Nizhniy Novgorod, Russia and a 42 branch network.

“The successful completion of this transaction opens a new chapter for our customers, our employees, our businesses, and our investors and lenders.” said Pieter van Groos, the chief executive officer of the newly established CEE Microfinance.  “We are convinced that these businesses have tremendous potential to expand accessible and affordable financial services to both current and new customers that are underserved by traditional commercial banks and finance institutions. These acquisitions also provide a starting point for further acquisitions and create scale in the region.” Pieter van Groos was previously CEO of GE Money Bank in the Czech & Slovak Republics, and prior to this worked for McKinsey and Exxon. In addition, Koen Wasmus joins as COO of CEE Microfinance. Wasmus was previously CEO of ProCredit in Kosovo and held other management positions within ProCredit. Further appointments to the CEE Microfinance team will be announced.

Clive Moody, Managing Partner of dfe partners, who negotiated and led the transaction said, “The challenges for success in the maturing microfinance sector in Central and Eastern Europe have and will continue to change. What we see as critical to the future of CEE Microfinance is fresh vision combining the capabilities of experienced management with active shareholders who promote strong corporate governance and provide much needed access to capital. We believe there is much to be gained through developing a common business model across the three institutions that will then serve as a template for further country acquisitions.”

“The formation of CEE Microfinance with presence across three territories, including the banking license in Russia, allowed us to recruit a level of expertise to manage these operations that combines the best practices not only from the microfinance world, but also from the wider financial services environment,” said Patrick Fisher, CEO of Creation Investments. “Pieter and Koen individually have extensive experience, that combined provides a management strength that is the essential ingredient of a successful microfinance business in Central and Eastern Europe for the next decade”.

About CEE Microfinance Holdings, N.V.

CEE Microfinance Holdings, N.V. is a Dutch public limited liability company.  CEE Microfinance is involved in the business of owning microfinance and small and medium enterprise lending institutions in unbanked and underbanked markets and client segments in Central and Eastern Europe.  CEE Microfinance is owned by a Dutch Coöperatief formed by the Balkan Financial Sector Equity Fund CV and Creation Investments Social Ventures Fund I.  The Balkan Fund is a Netherlands investment fund, managed by Development Finance Equity Partners AG, Switzerland.  The Creation Social Ventures Fund is a U.S. investment fund, managed by Creation Investments Capital Management, LLC.

For more information, visit http://www.dfe-partners.com/ or http://www.creationinvestments.com/.

Or contact:

Clive Moody, Managing Partner, dfe partners AG
Phone:   +44 1962 850736
Mobile:  +44 7866 565588
cmoody@dfe-partners.com

Patrick Fisher, Chief Executive Officer, Creation Investments Capital Management, LLC

Phone: +1.312.784.3980
Mobile: +1.773.960.8520
patrick.fisher@creationinvestments.com