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> Posted by Danielle Piskadlo, Manager, Investing in Inclusive Finance, CFI
#Allinforimpact was the hashtag at “Investing for Impact”, a socially responsible investing (SRI) conference in Boston. Maybe not “all” quite yet but certainly “more” investors are going in for impact, as indicated by the growth in attendance at the conference over the years. Investing for Impact was sponsored by socially responsible investors, such as Calvert Investment and Trillium Asset Management, who not only screen potential investee companies in terms of meeting certain environmental, social, and governance (ESG) criteria – but also serve as watchdogs for the sector and advocates for impactful companies.
A Few Top SRI Trends (from the conference)
Allowing Sinners to Repent: Some companies with bad names in the 1970’s such as General Electric and Ford have changed enough internally to now qualify within some investors’ ESG criteria. As one speaker put it, “What kind of church would we be if we didn’t allow sinners to repent?”
Shades of Grey: Tobacco, firearms, and carbon were across the board clear divestments. But the jury was still out on some companies and business models. For instance, Nestlé, which in the 1970’s came under fire for promoting baby formula in developing countries, has since done a lot to accelerate research on diabetes. Peapod, and other grocery delivery services, are making a pitch to be included as impact investments because the energy saved by not storing food, and the associated reduction in food waste, are positive externalities to consider.
> Posted by Anna Kanze, Chief Operating Officer, Grassroots Capital Management
The initial public offering (IPO) of Chennai-based Equitas Holdings Ltd., the holding firm for the fifth-largest microlender in India, was very successful, raising nearly US$235 million (Rs 1,525 crore) and demonstrating the maturation of the microfinance and financial inclusion sectors in India.
When the stock opened on April 7 to the domestic market, the demand greatly exceeded the number of available shares (16x oversubscribed) and provided a strong exit (an average multiple of 3.6x) for Equitas’ shareholders, which included a mix of social and responsible investment funds and traditional private equity investors. The stock opened to international buyers on April 21 and closed with a price on the first day of trading 23 percent above the issue price.
Funds managed by Caspian Impact Investment Adviser (Caspian), an Indian investment management and advisory services company that invests capital in businesses delivering both financial and social value, were early investors in Equitas and active in its governance. (Another Caspian-backed microfinance firm, Bengaluru-based Ujjivan Financial Services Ltd., the fourth-largest microfinance lender in India by assets under management, raised approximately Rs 900 crore in an initial public offering that opened on April 28 and was nearly 41 times oversubscribed as of closing on May 2, 2016.) Given this market activity, we at Caspian and Grassroots Capital Management PBC, who work together closely on this and other investments, are prompted to take a closer look at what this IPO means for the company, its clients, and the industry.
> Posted by Center Staff
Do you want to know about the coolest financial inclusion startups in the world and how they work? Or the entrepreneurs behind these startups and how they got off the ground? VentureKast, or VKast, is a new podcast series from Accion’s Venture Lab that takes you directly to the entrepreneurs, offering a window into the converging worlds of impact investing, startups, fintech, and financial inclusion.
As you’re probably familiar, Venture Lab, or VLab, is an Accion investment initiative that provides patient seed capital and support to pioneering financial inclusion startups. What you may not know are all the innovations in business and technology that Venture Lab investees harness to provide customers with better, cheaper, and more appropriate financial services. VKast spotlights how these startups break new ground in the financial inclusion landscape, from the unique perspectives of the entrepreneurs that lead them.
The VLab team writes, “We want to celebrate our entrepreneurs’ journeys and let their voices be heard to inspire other aspiring entrepreneurs, to draw in investors and potential clients to their businesses, and to let the world know how cool financial inclusion entrepreneurship really is.”
The inaugural episode of VentureKast features Ranjit Punja, CEO and Co-Founder of CreditMantri, a Venture Lab portfolio company based in Chennai, India that offers financial advisory services to consumers that are underbanked, credit negative, or new to formal financial services. CreditMantri uses an automated web platform and call center to help consumers access their credit reports, understand their credit scores, improve their creditworthiness, restructure outstanding debt, and get access to relevant financial services. Check out the first VKast episode to hear Ranjit discuss, among other things, how he came up with the idea for CreditMantri, how he assembled his team of co-founders, and his vision for the company.
> Posted by Saran Sidime, Operations Assistant, the Smart Campaign
West Africa is the second-fastest growing regional economy in Africa. Its GDP is more than double that of East Africa. However, its impact investing landscape doesn’t reflect this.
There are currently 45 impact investors active in the region, including 14 development finance institutions (DFIs) and 31 non-DFIs. Direct impact investments deployed in the region totaled $6.8 billion between 2005 and 2015. This is small relative to East Africa, which has over 150 investors and $9.3 billion in deployments on the books for roughly that same time period. Nevertheless, the investing trends in West Africa are encouraging, according to The Landscape for Impact Investing in West Africa, the third in a series of regional market landscaping studies published by the Global Impact Investing Network (GIIN).
The main barriers to impact investment in the region, according to the GIIN, include a lack of investment readiness among entrepreneurs and investees (in part due to difficulty obtaining bank financing), unpredictable policy environments, difficulty raising capital locally (among fund managers) compared to global standards, few exit examples, and macroeconomic and political instability. That is a truly daunting array of challenges. While in recent years there has been strong growth and investment in ecosystem actors such as incubators, accelerators, associations, and technical assistance providers, the ecosystem is not at sufficient scale to service the needs of the region.
> Posted by Hatem Mahbouli, Investment Officer, FMO
Social Impact Bonds
A lot has been said on social or development impact bonds (SIBs), and the instrument evidently has acquired enough vintage to be subjected to an insightful review by the Brookings Institute on the promises and limitations of its applications.
To give a short description, SIBs are not bonds (too late to change the name apparently), but sort of a public-private partnership, where investors are only repaid by the donors or government commissioners if and when pre-agreed social outcomes are achieved, transferring the risk of failure from donors/government (outcome payers) to investors.
SIBs can change perspectives where social issues move from being budget issues to business cases. The proposal is very appealing for impact investors as it offers new opportunities to deploy capital for social impact, with a strong focus on accountability and credible measurement of the achieved impact.
Applicability to the financial inclusion space
To date, very few SIBs have been launched in low income countries, despite many parties closely watching deployments elsewhere. Issues range from legal constraints to high transaction costs, but let’s assume for a moment that there is enough will, incentives, and capacity to overcome those limitations and launch a SIB in financial inclusion. What would this look like?
For a SIB to work, it needs to tackle what we call a “SIB friendly” issue or segment. You cannot apply it to any problem. The intervention – to put it very shortly – needs to be limited in time, have a specific scope, and an output (or outcome) that is relatively easy to measure and to value. Of course, for the whole structure to make sense, there needs to be an outcome payer who is willing to buy those outcomes, and an investor willing to take the risk.
> Posted by Center Staff
The 2016 Harvard Business School – Accion Program on Strategic Leadership in Inclusive Finance is now accepting applications for what will be another exceptional week of learning and exchange among world leaders in financial inclusion. The program will take place March 28 – April 2, 2016 at the HBS campus in Boston, Massachusetts.
The 2016 HBS-Accion Program builds on ten successful years and over 600 alumni – CEOs, presidents, executive directors, and other high-level professionals – from roughly 100 countries.
Today’s landscape of financial services for the base of the pyramid is increasingly complex, with a diversity of products, providers, and support organizations extending services to previously excluded populations. Disruptive technologies and new ways of doing business are creating new possibilities for reaching more people with more types of services. It’s an exciting time for financial inclusion, though for leaders steering their organizations through this landscape, the pace and magnitude of change may look overwhelming. Financial service providers participating in the program will benefit from the guidance of some of the world’s best business minds to better understand the possibilities and the pitfalls of today’s financial services marketplace. Policymakers, regulators, and investors will find it valuable to get a closer look at how the industry is evolving in countries around the world.
> Posted by Center Staff
The latest edition of the Financial Inclusion 2020 News Feed, our weekly online magazine sharing the big news in banking the unbanked, is now available. Among the stories in this week’s edition are Indonesia’s first floating bank branch, a new report from the Impact Programme on the impact investing markets in sub-Saharan Africa and South Asia, and a paper from PricewaterhouseCoopers on the evolving cryptocurrency market. Here are a few more details:
- Bank Rakyat Indonesia’s new floating branch, offering all the services of its traditional branches, will boat its way around six of the Thousand Islands off the coast of Jakarta, which encompass around 8,000 of the bank’s customers.
- The Impact Programme’s new report explores investment patterns and future plans, revealing that, among other findings, industry participants are optimistic, though they see the need to both disaggregate the market and increase the range of investment instruments.
- PricewaterhouseCoopers, in a recently released paper, asserts that: “The discussion is no longer one of whether cryptocurrency will survive, but rather how it will evolve.” The paper examines how key market participants (merchants and consumers, tech developers, investors, financial institutions, and regulators) fit into the big picture.
For more information on these and other stories, read the latest issue of the FI2020 News Feed here, and make sure to subscribe to the weekly online magazine by entering your email address in the right-hand menu so you can be notified when the latest issue comes out.
Have you come across a story or initiative you think we should cover? Email your ideas to Eric Zuehlke at .
> Posted by Rafael Chapman, Analyst, UpSpring
Based on the latest report from the Giving USA Foundation, philanthropy efforts in the United States hit a record high in 2014 with total contributions reaching about $360 billion. Charitable giving is on the rise in the United States, as this figure represents a 7 percent increase over 2013. However, contributions to nonprofits serving Native American communities remain persistently low, representing well under 1 percent of philanthropy in the country.
The need is growing, however. The Native American population grew 27 percent from 2000 to 2010, almost three times the national average. Based on 2012 data, there are over 5 million people in the U.S. who identify themselves as American Indian or Alaskan Natives, and this number is expected to exceed 6.5 million by 2020.
More than 20 percent of Native Americans live on reservations where living conditions are far from tolerable. In these lands that have been inhabited for centuries, the average unemployment rate is well over 10 percent and nearly a third of reservations consider themselves considerably overcrowded. Moreover, due to lack of formal financial history records and conventional employment information, most residents in these reservations lack access to the traditional banking system, which has contributed to a severe unmet need for accessible capital among Native American communities.
All of this leads to the question: If living conditions are so deplorable in this growing community, why haven’t we increased our charitable contributions and attentions towards Indian country?
Myth #1: Indian gaming brings a lot of money to Native American communities
> Posted by Center Staff
Impact investing in East Africa has grown strongly over the past five years with over $9.3 billion disbursed, more than 1,000 deals, and roughly 150 investors managing about 200 active investment vehicles. These are among the findings outlined in a new report from the Global Impact Investing Network and Open Capital Advisors, which provides a state of the market analysis for impact investing in the East Africa region. The report examines the supply of global impact investment capital, the demand for investment resources, challenges and recommendations, and the country-level markets. What was found?
Here are a few of the report’s key messages:
- Kenya dominates impact investing in the region, accounting for more than half of its deployed impact capital and having more than three-times the in-country fund staff of any other country.
- Uganda ranks a distant second in capital received at 13 percent of that of the region, receiving support from its favorable business and regulatory environments.
- Despite its GDP being 50 percent bigger than Uganda’s, Tanzania claims about 12 percent of the region’s impact capital, owing its stature in part to its low population density, weak transportation infrastructure, and relatively unpredictable government interjections.
Apis Partners and Accion Frontier Investments Group publish an operational framework for measuring impact in inclusive financial services investing
> Posted by Apis Partners and Accion Frontier Investments Group
A key aspect of investing for social impact is being able to effectively measure impact, which has always been challenging. Whilst there have been several well-informed attempts to create uniform standards to address this challenge (such as IRIS and GIIRS Ratings), these have largely been intended to compare impact investments across multiple industries. This can be a valuable exercise for multi-sector fund managers, but the approach invariably leads to a trade-off: using the same scale to measure impact across a number of diverse industries leads to a lowest common denominator analysis. These standards seek to measure impact across industry sectors, but they do not provide information about the nature of social change created within each industry. At the other end of the spectrum, several fund managers have developed bespoke systems to measure the impact of their own portfolios. These systems have been tailored for insurance at the base of the pyramid or poverty alleviation progress, and they do a good job of accomplishing those goals. Unfortunately though, they are often too specialized to allow for any comparison across impact managers.
Therefore, the most optimal approach to impact measurement is that which: (1) surfaces the specific nature of impact created in a sector, (2) remains broad enough to allow for some objective comparison across managers, (3) but does not seek to compare the incomparable. Such an approach only seems possible when impact measurement is focused on specific industries.
It is with this approach that Apis Partners and Accion Frontier Investments Group have chosen to operate. Apis and Accion are fund managers investing specifically in inclusive and innovative financial services for the un- and under-banked. Like other impact focused investors, we have a dedicated mission to provide social as well as financial return on investments, which requires the measurement of social impact in a real, quantifiable way.
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