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Creation Strives for Good Returns—and a Better World – MiddleMarketGrowth.org

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Creation Strives for Good Returns—and a Better World

Small things do add up.

Or so it seems for Patrick Fisher and his growing team at Chicago-based Creation Investments Capital ManagementThe private equity firm aims to marry healthy investor returns with a social impact mission to provide microloans to the working poor.

In countries such as Sri Lanka, Albania and Mexico, Creation is scooping up small private financial services organizations to fill in the gaps where traditional lenders don’t have the inclination to tread— providing needed financing to struggling entrepreneurs.

“Big banks have thought, there’s not a lot of money in making a $100 dollar loan because it costs $20 to $50 to make that loan,” says Fisher, the firm’s 36-year-old founder. “If you do it in a certain model, it’s actually very efficient.”

“Big banks have thought, there’s not a lot of money in making a $100 dollar loan because it costs $20 to $50 to make that loan,” says Fisher, the firm’s 36-year-old founder. “If you do it in a certain model, it’s actually very efficient.”

Creation acquires nongovernmental organizations and charity-owned lenders with solid foundations that lack expertise in back-office systems, human resources and business development.

“There’s a need for investors like us that have the real focus and the next skill set,” he says.

Fisher is a former banker whose passion for emerging markets was fueled by a stint in China for JPMorgan. His co-founder, Ken Vander Weele, had nearly two decades of experience in microfinance when they started the firm in 2007. The Chicago staff has grown to eight; in addition, the firm employs representatives in Eastern Europe, Mexico and India.

Creation’s portfolio companies typically help individuals and small businesses obtain working capital—money for purchases that can make a big difference: a tractor to speed harvest, a motorcycle to deliver goods, sewing machines to mechanize production and the like.

“One of the key things here is that these aren’t consumer loans,” Fisher says. “These are loans to individuals and small businesses that are going right into their business.”

 Besides loans, Creation’s portfolio companies offer services such as remittances, microsavings and microinsurance. They operate on nine platforms, serving some 4.5 million entrepreneurs with roughly $1.1 billion in loans outstanding.

Fisher, whose firm has raised $140 million in equity plus debt funding, says his returns are comparable to those of traditional private equity funds. Despite higher levels of risk, the funds are backed by some heavy-hitting institutional investors that decline to be named, as well as families and family offices. Return on equity at Creation’s companies averages about 20 percent.

And Creation is far from finished. Globally, says Fisher, there are thousands of additional financial services organizations ripe for consolidation and capital injections to get to the next level. The firm is looking primarily at growth in “core emerging markets,” such as Brazil, that have stability and a regulatory regime, he says.

“Charities still need to do the early work,” Fisher says. “After a certain point in time, these things do become very compelling investments.”


Patrick_Fisher

A former banker with JPMorgan, Patrick Fisher founded Creation Investments in 2007. He is responsible for overall management of the firm, including deal generation, due diligence, deal structuring and negotiation, along with fundraising, investor relations and portfolio oversight. His background includes work in international banking and global treasury and trade services.

 

 

http://www.middlemarketgrowth.org/creation-strives-good-returns-better-world/

Creation Investments Social Ventures Fund II, LP Announces An Oversubscribed Final Fund Closing of $75 Million

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FOR IMMEDIATE RELEASE

CHICAGO, IL – June 14, 2013 – Creation Investments Social Ventures Fund II, a global private equity fund focused on financial services and microfinance, completed its final closing on May 31, 2013 with total committed capital of $75 million USD.  The Fund was oversubscribed on its target of $60 million USD less than one year from launching, and hit its hard cap of $75 million USD with substantial investor support.

 

Creation Investments Capital Management, LLC, headquartered in Chicago, Illinois, is a leading impact investment fund manager with an overall investor base composed of over 100 US and European institutional and family office investors along with several high net worth individuals.  Over 90% of Fund I investors committed to Fund II, alongside a General Partner commitment of over $7.5 million.

 

To date, the Fund has deployed 35% of its committed capital, making equity investments in three Microfinance Institutions (MFIs) and Small-and-Medium Enterprise Lenders in Latin America and Asia.  Specifically, portfolio holdings include: Grupo Finclusion S.A.P.I. de C.V. SOFOM E.N.R. (Mexico), Sonata Finance Private Limited (India), and Grameen Financial Services Private Limited (India).

 

Each of the Fund’s portfolio companies is committed to providing financial services to under-banked individuals and businesses, helping to facilitate access to capital and economic development. Beyond small business lending, several of the Fund’s portfolio companies offer micro-insurance, micro-savings, money transfer, micro-pension products and other financial services. As of March 31, 2013, the total aggregate loan portfolio is $145 million USD with over 573,000 active borrowers.

 

Creation Investment Social Ventures Fund II seeks to make significant growth equity investments in earlier stage, high potential financial services providers in emerging markets, as well as buyout transactions 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 allocate capital in three major geographic regions – Latin America, Asia, and Eastern Europe – resulting in a diverse, global portfolio in core emerging markets.

 

The Creation Investments team, led by Patrick Fisher and Ken Vander Weele, has proven its 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 responsible investment and client protection principles as a UN PRI signatory and Smart Campaign member, and add value through active involvement in all levels of the business.

 

“We are excited to have attracted a sophisticated set of private sector investors to the global financial inclusion space, providing them with the opportunity to maximize their financial and social returns through impact investments,” said Patrick Fisher, Managing Partner and Founder of Creation Investments.

 

Mayer Brown LLP served as legal advisor and KPMG LLP as tax advisor and auditor.  Silicon Valley Bank supports the Fund and the Fund Manager through its banking, credit and foreign exchange services. The General Partner is comprised of the Creation Investments team and affiliates of Promus Holdings, LLC, a Chicago based multi-family office and alternative assets manager in which Mr. Fisher is also a Partner.

 

About Creation Investments Capital Management, LLC:

Creation Investments is a leading alternative investment management company with a focus on private equity investments in Microfinance, Small-and-Medium Enterprise lenders, Emerging Market Banks, and other Financial Services Providers. Creation Investments sponsors and manages 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/

Investing In Inclusion: How To Deliver Financial Services To The World’s Poor – Forbes

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Editor’s Note: Michael Schlein brings more than 25 years of experience in international banking, management, and public service to his role as president and chief executive officer of Accion. Previously he served in senior executive roles at Citibank and the US Securities and Exchange Commission.

Modern financial markets exclude billions of the world’s poor. That’s a failure of those markets—and a failure of imagination. A more financially inclusive world would give billions of people living in poverty access to a full range of important financial services, yielding a high rate of return by economic, social, and societal measures. The challenge is how to achieve this in a responsible, sustainable way that provides the greatest number of people with the financial tools they need to improve their lives in the shortest amount of time.

That is precisely the mission of Accion, a global nonprofit dedicated to creating a financially inclusive world. We operate in poor communities throughout Latin America, Africa, India, and China and see firsthand how these services help transform lives, create opportunities, and build stronger, more resilient communities.

As nonprofits, Accion and our peers can take chances that the private sector cannot. Over our 50-year history, we have helped build 64 microfinance institutions in 32 countries that today serve millions. In the last few years alone, we have supported institutions in rural communities such as the Amazon and Inner Mongolia and expanded the array of financial services for the poor beyond credit to savings, insurance, and payments.

One point is clear: philanthropy, though critically important, is insufficient to achieve full financial inclusion. We need to harness the capital markets and create institutions that deliver both social and financial returns. Though we are a nonprofit, we work to build sustainable, scalable, for-profit companies dedicated to serving the financial needs of society’s most vulnerable members: those living in poverty.

Today, traditional lending institutions largely ignore the poor. And some nonprofit organizations discount the for-profit motives of the private sector, seeing them as exploitative and off-mission. Neither view is accurate. In fact, for-profit microfinance is sustainable, scalable, and socially progressive—complementing nonprofit services and creating an entire industry of institutions that can compete for clients, expand access, and accelerate innovation.

Twenty years ago, Accion helped create Bolivia’s BancoSol, which today is one of the world’s best-known microfinance institutions. Its creation as a commercial institution dedicated solely to serving the poor was controversial, unprecedented—and a rousing triumph. As the world’s first for-profit bank dedicated to serving the poor, BancoSol tapped the debt and equity markets, attracting both foreign investment and expertise. It focused on strong management and operations, better governance, innovation, and improved responsiveness to clients. To date, BancoSol has loaned more than $2 billion to more than 1.5 million clients. It has a 90 percent client-retention rate and a 99 percent repayment rate. Its success has spurred competition and innovation in what is now one of the most robust microfinance markets in the world.

Accion also helped build Peru’s Mibanco, which launched in 1998. Today Mibanco has more than 400,000 active borrowers and more than 100 locations throughout the country. Mexico’s Compartamos Banco, in which Accion was a major founding investor, is equally impressive. Its operations grew so quickly and efficiently that, in 2007, it launched an initial public offering with a monumental response. Thousands of other microfinance institutions were inspired by Compartamos’ success, which in turn creates more competition and better services for the poor.

Accion is proud to have helped launch and grow these pioneering institutions, which are models for the world and whose collective outreach has brought financial services to millions who would otherwise be left out.

For-profit microfinance is also promising for investors. Take Accion Investments in Microfinance (AIM), a for-profit equity fund created in 2003 to provide capital to microfinance institutions (MFIs) working in challenging markets where such funding was typically unavailable. AIM was designed as a “double bottom line” equity fund, one that measured success in both profitability and social impact.

Over the past decade, AIM has produced annual returns of nearly 16 percent, making it one of the most successful microfinance equity funds ever. In the process, it helped build some of the strongest MFIs in the world, including BancoSol, Mibanco, and the Accion Microfinance Bank—the leading microfinance bank in Nigeria. Before AIM’s investments, those institutions collectively served a total of 386,000 borrowers and 245,000 depositors. Today, they reach almost 1 million borrowers and 1.2 million depositors who might otherwise have no access to financial services.

The future of financial inclusion goes beyond traditional microfinance. We also embrace venture capital and technical assistance for start-ups, with bold, disruptive business models aimed at helping those living in poverty. For example, Accion is investing in companies such as DemystData, which leverages big data—huge sources of information that can be analyzed to help financial institutions broaden their outreach to poorer clients. Others, like Tiaxa, use mobile technology to make small “nano” loans over the phone, which can help reach people living in remote communities. Still others are pushing the boundaries of inclusion, offering financial products such as life insurance to South Africans living with HIV/AIDS—an idea that was unthinkable just a few years ago.

Although it is still too early to determine the impact of these brand-new companies, they have the potential to have a significant impact on the lives of our clients. We need to invest in more fast-moving, innovative ideas like these. Although the financial-inclusion movement is rapidly evolving, it remains young and has much to learn. Growing pains are normal, but they must be addressed head on to strengthen the industry and inspire the next generation of institutions that will create greater opportunities for the poor.

Accion’s Center for Financial Inclusion is a good start. It brings together industry players to tackle common challenges and create the conditions to achieve full financial inclusion on a global scale. For example, the center’s Smart Campaign promotes the protection of clients through greater transparency, prevention from overindebtedness, and the provision of means to address concerns. In just three years, its client-protection principles have been endorsed by more than 1,000 microfinance institutions in 130 countries representing more than 60 million clients.

By building competitive, commercially viable financial institutions that provide a healthy return on capital and by taking bold risks and investing in innovative ways to expand financial services to the poor, Accion and our partners are spurring new opportunities and sustainable progress throughout the developing world, and helping to bring billions more into the global economy. That is how change happens!

This article is part of “The Art and Science of Delivery,” an anthology of essays published by McKinsey & Company in honor of the 10th Anniversary of the Skoll World Forum. It is the most recent installment of McKinsey’s ongoing series, Voices on Society, which convenes leading thinkers on social topics. (Copyright (c) 2013 McKinsey & Company. All rights reserved. Reprinted by permission)

Grameen Koota raises $10 million USD (or 532 million INR) in its 3rd round of equity funding lead by Creation Investments

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Grameen Koota raises $10 million USD (or 532 million INR)
in its 3rd round of equity funding lead by Creation Investments

February 27, 2013 – Bangalore, India: Grameen Financial Services Pvt Ltd (GFSPL), popularly know as Grameen Koota today announced its third round of equity funding of $10 million USD (or 532 million INR) lead by Creation  Investments Capital Management (Creation Investments Social Ventures Fund II, L.P. USA.  Two current investors also invested in this round – Incofin Investment Management (IIM Impulse 2, Mauritius) and MicroVentures (MVHS.p.a, Italy and MV SICAR, Luxembourg).

GFSPL has been working with poor and low-income households for the past 13 years and has provided these households with diverse financial and developmental services that caters to all life-cycle needs of its over 350,000 clients spread across three states of Karnataka, Maharashtra and Tamil Nadu. The equity  funding comes close at the heels of the instiution receiving $3.9 million USD (or 210 million INR) in debt funding through unsecured, redeemable, non-convertible debentures (NCDs) from Global Commercial Microfinance Consortium II B.V., Netherlands, a fund managed by Deutsche Bank.

Speaking on the new equity infusion, GFSPL Managing Director Suresh Krishna, said “The newly infused funding will add to the growth of the company and help Grameen Koota achieve its target of reaching out to over 10 lakh poor and low income households.  The capital will also strengthen our vision towards extending and expanding our loan operations to other neighbouring states.”

GFSPL understands that micro-lending cannot happen in isolation and therefore has rigourously engaged in social development activities including entrepreneurial education, health, sanitation, etc. Commenting on the equity raised, Founder-Chairperson, GFSPL  Vinatha Reddy,  added “Ours has been a constant endevour towards being a well run MFI with a firm social purpose and we are happy that existing investors have reposed their faith in Grameen Koota’s work by increasing their stake, as we welcome Creation Investments, our new investor. ”

For Creation Investments, the equity funding is just the beginning of a long relationship with GFSPL. Speaking about the capital infusion, Creation Investments co-founder/director Ken Vander Weele said  “We are excited in partnering with a leading MFI like Grameen Koota that has brought about innovative loan products and are constantly evolving themselves to cater to the financial needs of the poor in India.“

Paolo Brichetti, Chairman of MicroVentures, a veteran in the social capital investment space in developing countries such as India, believes that the equity raised will only benefit the company and further enhance its activities towards accomplishing its  vision. He said, “Our relationship with Grameen Koota has deepened a further notch and we are glad that we continue to back an MFI like Grameen Koota that continues to remain a benchmark within the Indian Microfinance sector.”

Speaking on the follow-on investment in GFSPL, Aditya Bhandari (Regional Director, Incofin South Asia) stated “Grameen Koota’s instant brand recall amongst clients and its strong focus on client relationship makes it as one of the best MFIs in the world. We are excited to once-again support GFSPL in its vision to create long term sustainable value for all stakeholders (clients included).”

About Grameen Financial Services Private Limited:

Grameen Financial Services Private Limited (GFSPL), a microfinance institutions headquartered in Bangalore, popularly known as Grameen Koota has over 350,000 clients with 1300 employees working out from 168 branches in Karnataka, Maharashtra and Tamil Nadu. It had loan outstanding of about $84 million USD (or 4.5 billion INR). Being socially focused Microfinance Institutions; Grameen Koota has over a decade of experience in micro lending towards Joint Liability Groups formed exclusively of women from poor and low income households with other support products like Water, Sanitation, Health Care, Energy Efficient Cook Stove etc. For more information, visit www.gfspl.in

About Creation Investments Capital Management

Creation Investments is an alternative investment management company with over $100 million in assets under management. Named a leading Impact Investment fund manager by ImpactAssets50 in 2011, Creation Investments Capital Management, LLC currently manages 4b Capital Fund A, L3C, Creation Investments Social Ventures Fund I, and Creation Investments Social Ventures Fund II, with a focus on private equity 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 maximize financial and social returns on investment. Investments in microfinance and social ventures create opportunities through access to capital and needed products and services for those living in poverty to engage in small-business activity, income generation, and significantly impact those living at the bottom of the economic pyramid.

About MicroVentures

The MicroVentures initiative was started-up in Italy by a group of private social entrepreneurs with previous experience in the field of social venture capital and business cooperation with the Developing Countries. The initiative has gradually expanded into an international network of affiliates, which includes the Bangalore-based MicroVentures India (specialized in providing debt to indian MFIs), Bina Artha Indonesia and  MicroVentures Investments SICAR, a specialized investments fund based in Luxembourg, which provides equity  and debt financing to promising Microfinance Institutions in Asia and Latin America.

About Incofin Investment Management

Incofin Investment Management (www.incofin.com) is a specialized fund management company with more than 10 years of experience in microfinance and currently more than 350 M EUR assets under management. Incofin IM manages the following funds and facilities: Incofin CVSO (40 M EUR), Impulse (46 M EUR), Volksvermogen (10 M EUR), VDK (75 M EUR), Rural Impulse Fund I (30 M EUR), Rural Impulse Fund II (120 M EUR), BIO (10 M EUR) and Fair trade Access Fund (20 M EUR). Investors are mainly Western Europe and US based, including ~50% public investors (DFIs such as IFC, KfW, EIB, FMO, BIO etc) and ~50% private (institutional investors such as banks, pension funds etc). The total investment portfolio includes over 100 MFIs in more than 44 countries around the world. Incofin IM has a strong track record, having executed more than 566 transactions since 2003.

 

http://in.reuters.com/article/2013/03/06/grameen-koota-raises-10m-round-led-by-cr-idINDEE92504P20130306

 

http://www.legallyindia.com/201303043483/Private-equity-/-VC/tatva-jsa-on-us-social-vc-s-7m-pe-in-indian-mfi-grameen

 

http://www.ivcpost.com/articles/6926/20130306/grameen-koota.htm

 

http://www.thehindubusinessline.com/companies/grameen-koota-raises-rs-5320-cr-equity-fund/article4482251.ece

 

http://www.thehindubusinessline.com/industry-and-economy/banking/grameen-koota-raises-over-rs-53-cr-in-third-round-of-funding/article4479058.ece

 

http://articles.economictimes.indiatimes.com/2013-03-05/news/37469982_1_incofin-grameen-koota-microfinance-firm

 

http://www.altassets.net/private-equity-news/by-news-type/deal-news/creation-investments-leads-10m-grameen-equity-financing.html

 

http://blogs.ft.com/beyond-brics/2013/03/08/india-hint-of-recovery-in-microfinance/#axzz2N14VCTtL

Making a profit from making a difference – FT.com

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August 5, 2012 5:40 am

Making a profit from making a difference

By Sophia Grene

Sustainable logging carried out in Cameroon in the Congo Basin natural woodland©GettySustainable logging carried out in Cameroon in the Congo Basin natural woodland: preserving forests is just one project impact investing can help

To many, investment is purely about generating a return on their money, but a growing band of wealthy individuals and institutions are seeking to achieve a little more.

“There’s a growing hunger from the wealthy to go beyond how to spend it, understanding if they don’t engage with these [social and environmental] issues, social problems will arrive on their doorstep,” says Paul Szkiler, chief executive of Truestone Impact Investment.

Impact investing, most commonly defined as investments made with the intention of helping to solve a social or environmental problem as well as generating a financial return, has seen growing interest from investors, particularly since the financial crisis.

It covers a wide range of areas, from microfinance to private equity in developing markets and even “social bonds”, an innovative way for governments to fund services provided by non-state bodies on a payment-for-results basis.

The term impact investing was coined by the Rockefeller Foundation in 2007 and a year later the Global Impact Investors Network was launched. Since then, investment managers and intermediaries report a steady increase in interest in the sector, but it is hard to pin down a reliable figure, given the sector’s fragmented nature and the difficulty of defining it.

For one of the most developed and codified sectors of the impact investing world – microfinance – estimates as of 2010 vary from $7bn invested (from Swiss microfinance manager and adviser Symbiotics) to $24bn committed (from the Consultative Group to Assist the Poor), demonstrating the difficulty of getting a sense of the size of the sector.

The GIIN definition is frequently adopted: “Impact investments are investments made into companies, organisations, and funds with the intention to generate measurable social and environmental impact alongside a financial return”, but even that leaves a number of queries, such as whether that financial return is expected to match market returns or if it comes second in any conflict between it and the social impact.

In general, practitioners and investors are keen to make a distinction between “social impact first” investments, where the investor is prepared to sacrifice some financial return in exchange for the belief their money is doing good, and “social and financial” investments, where the investment product aims to produce returns comparable with the market.

“The second type appeals more to high net worth individuals,” says François Passant, executive director at Eurosif, the European social investment forum. “It’s got that entrepreneurial spin that resonates with them.” For people who got rich by building their own business, it feels more appropriate to help others by encouraging them to work for themselves than to give money, he explains.

Mr Szkiler remembers a presentation to JPMorgan about his business: “The global research guys were saying ‘hmm, that’s ambitious’, but the wealth management people said ‘that’s exactly what we’re looking for for our clients’.”

Truestone is about to start fundraising for its Global Impact Fund, which aims to return an annualised 8 to 10 per cent net over the medium-to-long term. With a six month lock-up period, the fund does require investors to be prepared to take a longer-term view, but Mr Szkiler is confident of reaching his target of £40m.

Institutional investors are not immune to the appeal of doing well by doing good, he adds. “We see institutional investors in that area, but so far really only the giants,” he says. Their motives may not be precisely the same as those of individuals: “There’s an element of looking for stable financial returns, even if modest, that are decorrelated with the rest of financial markets.

“There’s also a reputational benefit for the large institutional investor, and there is the concept of universal ownership,” he adds.

The theory of universal ownership states that beneficial owners in a fund not only have an interest in direct financial returns but also in making sure their investments work towards improving the world in which the investors live.

The categorisation of an investment vehicle as impact investment does not always come from the promoter. Nikko Asset Management has two World Bank Green Bond funds, invested in the triple-A issuer’s bonds – proceeds from which are used to fund climate change mitigation projects.

“We didn’t set it up as an impact bond, but it falls in that direction naturally,” says Stuart Kinnersley, Nikko’s European chief investment officer. “Investors are getting this positive externality in addition to the market returns you would expect.”

Nikko’s institutional vehicle has seen approaches from investors specifically interested because they have identified it as an impact opportunity. “Many people are questioning the current model of capitalism,” points out Mr Kinnersley. A version that makes explicit use of the structures of capitalism to improve the world seems attractive to many of those questioners.

Unsurprisingly, development financial institutions such as the German KfW bank or Triodos Bank are interested in impact investing, as are many charities that rely on income from an endowment and prefer to make investments related to their mission rather than arbitrary unrelated investments.

In the UK, there are plans afoot to raise the profile of impact investing and make it more accessible to retail investors. This is the aim of the Social Stock Exchange, likely to launch some time next year.

It is the brainchild of Pradeep Jethi, a former product developer at the London Stock Exchange, and is backed by the Rockefeller Foundation and the UK’s Big Society Capital.

“I want to use my capitalist skills to make the world a better place,” says Mr Jethi. “If we don’t do something, capitalism will eat itself.”

Copyright The Financial Times Limited 2012.

Notre Dame, MIT Economists Demonstrate Wage Impacts of Large Microfinance Program

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JULY 20, 2012 BY  LEAVE A COMMENT

Fonkoze Credit Center – Participants in Chemen Lavi Miyó, a program offered by Fonkoze (a microfinance organization). The participants meet twice a week in Mirebalais, Haiti, to learn basic life skills. Photographer: Laura Elizabeth Poh

A major argument in favor of microfinance is that the poor who live in areas without banking services will gain higher returns on investments and increase their assets when provided with credit.

But a notable new study from the Consortium on Financial Systems and Poverty presents some of the first real evidence of microfinance impacts and indicates that the true returns of expanding access to credit are much more complex. Some of the greatest benefits to alleviating poverty, the study suggests, may be in the impact the programs have on driving up wages.

The research, by economists Joseph P. Kaboski of the University of Notre Dame and Robert M. Townsend of the Massachusetts Institute of Technology, examined changes in behavior resulting from the Thai Million Baht Fund. This initiative by the government in Thailand transferred one million Thai baht (about $24,000 at the time) to each of 77,000 villages throughout the country. The goal was to increase available credit and stimulate the economy. The findings were published earlier this year in the journal Applied Economics.

The CFSP study found that the village fund had the desired effect of increasing overall credit in the economy, and, in fact, in the long run, the program led to an overall expansion of credit. More significant, the authors argue, is that that wages increased by approximately 7% in a typically-sized village during the first two years that were tracked.

“This paper is the first real evidence we have on wage impacts of microfinance,” notes Kaboski. “The impact on wages is important in terms of the potential of microfinance as a poverty reduction program. Only a relatively small fraction of the poor want to borrow from microfinance, but a much greater share of the poor work, and might therefore benefit indirectly from an increase in wages. We are far from understanding the mechanisms, but there is great potential here.”

The authors suggest that the wage impacts may be because the fund led to a more efficient distribution of capital to entrepreneurs, which then increased the demand for labor. The study recorded that the wages increased for general non-agricultural labor, such as construction in the villages, but not for professional occupations or occupations outside of the village.

Additionally, the study showed, other effects of the injection of credit were more short-lived, including a notable jump in consumption, and increases in borrowing, business and labor income, and investment in agriculture.

The authors report that further examination of the data is underway. Their findings are based on an economic model they developed, using data captured as part of the Townsend Thai Data project, a monthly household panel survey that Townsend has led since 1997.

The paper, “The Impacts of Credit on Village Economies,” was published in the journal Applied Economics earlier this year.

Source: AAAS EurekAlert

Photo:  Bread for the World 

http://greenbuildingelements.com (http://s.tt/1iuIn)

Doughnuts Defeating Poverty – NYT.com

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OP-ED COLUMNIST

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Published: July 4, 2012 53 Comments

MASUMBA, Malawi

Damon Winter/The New York Times

Nicholas D. Kristof

Nicholas D. Kristof/The New York Times

Biti Rose Nasoni in the village of Masumba, Malawi.

If you want to understand some of the best new ideas to chip away at global poverty, an excellent place to start is the Nasoni family hut here in the southern African nation of Malawi.

Alfred Nasoni and his wife, Biti Rose, have had seven children in this village of Masumba. Two died without ever seeing a doctor. Alfred and Biti Rose pulled their eldest son out of school in the fourth grade because, they said, they couldn’t afford $5 in school costs for a term. And they farmed only part of their 2.5 acre plot because they lacked money for seeds.

Yet poverty is sometimes romanticized, and it’s more complicated than that. Alfred, 45, told me that even as his children were starving, he spent an average of $2 a week on local moonshine and 50 cents on cigarettes. He added that he also spent $2 or more a week buying sex from local girls — even though AIDS is widespread.

All this hints at an uncomfortable truth: The suffering associated with poverty is sometimes caused not only by low incomes but also by self-destructive pathologies. In central Kenya, a recently published government study found that men, on average, spent more of their salaries on alcohol than on food.

It’s a vicious circle: despair leads people to self-medicate in ways that compound the despair.

Yet there are escape hatches. In 2005, Biti Rose joined a village savings group founded by CARE, the international aid group. These “village savings and loans” are among the hottest ideas in development work. They now serve some six million people in 58 countries.

After recent financial crises, plenty of Americans love to hate banks, but many of the world’s poor don’t have that luxury: more than 2.5 billion people worldwide don’t have a bank account, according to a landmark World Bank report, “Measuring Financial Inclusion.”

The poor typically receive a pile of cash once or twice a year, at the end of a harvest, and then have no good way to save it. That increases the risk that some of it will be squandered.

In some African countries, cellphones are emerging as the new banking system. But here, and in much of the world, the solution is savings groups like Biti Rose’s. She and 19 other members met weekly and each deposited the equivalent of about 10 cents. The money was then lent out to members, and CARE coached them on how to start small businesses.

With a loan of $2, Biti Rose started making and selling a local version of doughnuts, which she initially sold for 2 cents each. “People really liked my doughnuts,” she noted, and soon she was making several dollars a day in profit. Inspired by her example, Alfred began growing vegetables and selling them; he turned out to be a shrewd businessman as well.

Seeing an upward trajectory in the family fortunes, Alfred cut out the girlfriends and curbed his drinking, he says.

Biti Rose and Alfred then had the resources to buy seed and fertilizer for all their own land and to lease an additional two acres as well. These days, they hire up to 10 farm laborers to work for them. In the old days, they harvested less than one bag of corn a year; this year, their harvest filled seven ox carts.

All savers aren’t that successful, of course, but there’s no doubt that the nudge to save money and start businesses can be transformative and self-sustaining. CARE moved on in 2009 to take its model to more needy areas in Malawi, but the savings groups around this village multiplied anyway. Other farmers envied Biti Rose and Alfred replacing their leaky grass roof with a tin one, and they decided to start their own savings groups. The idea has even spread, without CARE’s help, across the border to villages in Mozambique.

Yet I think there’s something going on here beyond microsavings and entrepreneurship.Esther Duflo, an economist at the Massachusetts Institute of Technology and co-author of an exceptionally good book called “Poor Economics,” argues that outside interventions sometimes work partly when they give poor people hope. That’s precisely what I’ve seen in many countries: Assistance succeeds when it gives people a feeling that a better outcome is possible, and those hopes become self-fulfilling as people work more industriously and invest more wisely.

For Alfred and Biti Rose, their hopes are now focused on their younger children (the oldest has married). Biti Rose never went to school at all, but she is planning to send her younger children to university.

She is also planning future purchases, including the first television in the area. But don’t think Biti Rose is going to kick back. She sees the TV as an investment.

“I’m a businesswoman,” she said firmly. “I can’t give anything away. If there’s a soccer match or something, anybody who comes in my house to watch will have to pay a fee.”

Morgan Stanley Smith Barney Announces Launch of Investing with Impact Platform

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Investing with Impact Platform offers an investment approach targeting risk-adjusted financial returns as well as positive environmental and social impact

Submitted by:Morgan Stanley

Categories:Socially Responsible Investing,Finance

Posted:Apr 26, 2012 – 01:30 PM EST

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NEW YORK, Apr. 26 /CSRwire/ – Morgan Stanley Smith Barney today announced the launch of a new investment platform designed to help clients align their financial goals and their personal values. The Investing with Impact Platform offers clients and Financial Advisors a broad range of investment options.

The concept of integrating social and environmental impact into investment decisions is not new, but its growing importance has led to a greater opportunity set for investors. Nearly one in eight dollars under professional management in the U.S. or about $3.07 trillion follows investment strategies that consider corporate responsibility and societal concerns.1

“This is an important initiative for Morgan Stanley Smith Barney,” said Andy Saperstein, Head of Wealth Management, U.S., at Morgan Stanley Smith Barney.”We hear frequently from clients and Financial Advisors about the importance of integrating sustainability themes into their investment portfolios. Now through the Investing with Impact Platform, MSSB is able to offer our clients an action-oriented approach to combine financial returns and their personal values.”

At launch, the Investing with Impact Platform will offer clients access to many opportunities spanning public and private market products through their Financial Advisors. This is the first phase in Morgan Stanley Smith Barney’s focused effort to meet investors’ desire for investment opportunities that center on positive social and environmental impact, without sacrificing financial performance potential. The launch of the Investing with Impact Platform will provide a substantial base on which to expand our offerings over time.

“Our goal is to build this into a robust offering to meet our clients’ needs, regardless of their impact priorities or what their portfolio fit might require,” said Paul Hatch, Head of Investment Strategy & Client Solutions at Morgan Stanley Smith Barney. “With over four million clients who have more than $1.7 trillion of investable assets, we are in a unique position to extend the reach of an ‘investing with impact’ program to one of the largest sets of investors in the world. Even a fraction of this total represents a substantial amount that could be invested in support of the common good.”

“At Morgan Stanley and MSSB, sustainability is at the core of our business and now, with the launch of the Investing with Impact Platform, we are able to help our wealth management clients align their investments with their desire to positively impact their communities,” commented Audrey Choi, Head of Global Sustainable Finance at Morgan Stanley. “We believe investments targeting positive environmental and social impact should be available to all investors from individuals to large scale institutions, and we look forward to continuing to broaden the reach.”

To find out more about the Investing with Impact Platform at Morgan Stanley Smith Barney, please contact your Financial Advisor or email InvestingwithImpact@mssb.com.

Morgan Stanley Smith Barney, a global leader in wealth management, provides access to a wide range of products and services to individuals, businesses and institutions, including brokerage and investment advisory services, financial and wealth planning, credit and lending, cash management, annuities and insurance, retirement and trust services.

For further information about Morgan Stanley Smith Barney, please visitwww.morganstanleysmithbarney.com.

Morgan Stanley (NYSE: MS) is a leading global financial services firm providing a wide range of investment banking, securities, investment management and wealth management services. The Firm’s employees serve clients worldwide including corporations, governments, institutions and individuals from more than 1,300 offices in 43 countries. For further information about Morgan Stanley, please visit www.morganstanley.com.

©2012 Morgan Stanley Smith Barney LLC. Member SIPC. CRC 493016 / 04/12

1 U.S. SIF: The Forum for Sustainable and Responsible Investment, Report on Socially Responsible Investing Trends in the United States, 2010

Mexico’s Compartamos Sees More Growth In Micro-Lending – WSJ.com

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MEXICO CITY (Dow Jones)–Mexico’s Compartamos SAB (CMPRF, COMPARC.MX) said Wednesday its net profit expanded 12% on the year in the first quarter as the microfinance lender grew its loan portfolio and attracted new clients.

Chief Financial Officer Patricio Diez told Dow Jones Newswires that the company is “very satisfied” with the results.

Compartamos grew its loan portfolio by 40% to 14.88 billion pesos ($1.13 billion) while expanding its client base by 23% to 2.47 million. Its net profit came to MXN503 million. In addition to Mexico, where 95% of Compartamos’ clients reside, the lender is also active in Guatemala and Peru.

Operating expenses rose 43%, to MXN1.18 billion, as the company opened 35 service branches, invested in new technology, added employees to service clients and spent more on advertising.

Diez said Compartamos sees a highly competitive environment among lenders to the low-income market segment, but not from large banks. “We have to always be focused on better products and services,” he said.

Compartamos has long aimed to loan in rural areas and to women, but is now beefing up its capabilities in urban and semiurban areas. The diversification into new markets and products has driven the lender’s rate of nonperforming loans higher, to 2.86% in March from 2.65% at end-2011 and 2.01% for first quarter 2011.

The vast majority of the lender’s clients in Mexico are women, whereas in Peru the split is more even between the two sexes, Diez said. Demand for credit in Guatemala is similar to the market Compartamos has in Mexico, mostly rural and mostly female.

Compartamos Profit Beats Estimates as Loan Portfolio Expands-Bloomberg

By Jonathan J. Levin – Apr 25, 2012 3:00 PM CT

Compartamos SAB (COMPARC*), the operator of microfinance companies in Mexico and Peru, posted first-quarter profit that beat analyst expectations.

Net income climbed 14.3 percent to 497 million pesos ($37.8 million) in the first three months of the year, the Mexico City- based company said today in an e-mailed statement. Banco Santander SA had projected profit would total 475.2 million pesos, according to an April 24 research note.

Outstanding loans rose 40 percent to 14.9 billion pesos, the company said.

Compartamos shares fell 2.1 percent to 15.35 pesos in Mexico City trading before release of the report.


				
				

A second Polish microcredit provider under Progress Microfinance

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11/01/2012A second Polish microcredit provider under Progress Microfinance

 

Inicjatywa Mikro, owned by Creation Investments Social Ventures Fund I and Balkan Financial Sector Equity Fund,  is joining the group of Polish microcredit providers under Progress Microfinance with a senior loan of up to EUR 4 million aimed at supporting the self-employed, in particular of the agricultural sector based in the South of Poland.

Inicjatywa Mikro is a non-bank microfinance institution established in Cracow in 1996 and one of the very few financial intermediaries offering microfinance in Poland. The funding through Progress Microfinance is expected to grow the microfinance portfolio of this institution and to support over 1,200 micro-businesses.

Inicjatywa Mikro will provide client education and mentoring, not only because of its credit risk benefits (i.e. making sure the client succeeds and can repay its micro-loan), but also because it is part of its very mission to help micro-entrepreneurs.

The European Progress Microfinance Facility (Progress Microfinance) is an EU microfinance initiative established with EUR 200 million of funding from the European Commission and the European Investment Bank and managed by the European Investment Fund.

Progress Microfinance aims to increase access to finance for micro-entrepreneurs, including the self-employed. It has a particular focus on, but is not restricted to, groups with limited access to the conventional credit market. Examples include female entrepreneurs, young entrepreneurs, entrepreneurs belonging to a minority group, entrepreneurs with a disability, sole traders etc. Loans of up to EUR 25,000 are made available through selected microfinance intermediaries participating in the facility.

The European Progress Microfinance Fund does not provide direct financing to micro-entrepreneurs or individuals, but it works through microfinance providers, such as FM Bank and Inicjatywa Mikro in Poland.

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