GIIN in the news Press releases

  • Microfight

    via The Economist

    July 28, 2010

    Summary

    The Economist examines the potential trade-offs that socially-motivated microfinance institutions must weigh as they consider an initial public offering — and what these trade-offs might mean for impact investors in these institutions.

    From original article:

    The loans that microfinance companies make may be tiny but their ambitions can be vaulting. Take SKS Microfinance. Already India's biggest microlender, with 6.8m clients and 5.8m active borrowers in the year ending on March 31st (see chart), it intends to become the world's largest by 2012, with 15m clients. To fund this growth, it hopes to raise nearly $350m by selling a 21.6% stake in an initial public offering (IPO) which got under way this week.

    According to the Consultative Group to Assist the Poor (CGAP), a think-tank housed at the World Bank, the IPO is only the second by a pure microfinance institution, after the offer by Mexico's Compartamos Bank in 2007. More may follow. CGAP reckons that SKS's move "should set the stage for future IPOs in the sector." The omens are good. On July 27th SKS announced that it had raised $64m from anchor investors, including JPMorgan Chase, Morgan Stanley, and India's ICICI Prudential and Reliance Mutual Fund, at the top end of the expected price range.

    Commercialisation appals some. Muhammad Yunus, the head of Bangladesh's Grameen Bank and the industry's founding figure, has described Vikram Akula, SKS's founder, as a "capable young man [who] took a wrong turn when he decided to use microcredit for making money." But Mr Akula points out that the amount lent by Indian microlenders in 2008 was less than 10% of estimated demand. He reckons that SKS should be doing more microfinance and doing it fast. That means making enough profit to attract capital.

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  • With Squeeze on Credit, Microlending Blossoms

    via New York Timesby Kristina Shevory

    July 27, 2010

    Summary

    In the recent recession, microlending organizations which began by serving small businesses in the developing world are starting to lend in the United States.

    From original article:

    Before the economic collapse, microfinance - the granting of very small loans, mostly to poor people - was a concept most closely associated with the developing world. But tight credit and the recession have increased the demand for smaller loans in the United States, giving microlending a higher profile and broadening its appeal. Both Kiva and Grameen Bank, a microfinance group that is based in Bangladesh and was started by Muhammad Yunus, winner of the Nobel Peace Prize for his groundbreaking work in microlending, have widened their lending to Americans.

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  • I4c Campaign Invests in Environmental, Social Change

    via Denver Postby Greg Griffin

    July 09, 2010

    Summary

    Impact investing gains visibility at the Lilith Fair, thanks to musician, entrepreneur, and Denver-native Casey Verbeck, whose idea for collaboration is profiled in this article.

    From original article

    Roughly $1 from each [Lilith Fair] ticket sale is invested in three companies and one nonprofit organization chosen by Verbeck and organizers of the female-oriented concert tour. The ventures also are promoting themselves at the concerts. Verbeck would not disclose the size of the investment.

    "The people who are truly tackling today's biggest challenges are doing it through entrepreneurship and collaboration," Verbeck said. "People are realizing they can be philanthropic and profitable."

    Verbeck, who managed the Yonder Mountain String Band until he quit to help raise his children a few years ago, said he is an entrepreneur at heart. He was looking for a way to support young companies with sustainable models or "triple bottom lines" of people, planet and profit.

    A growing field of venture-capital and private-equity firms serves these businesses. Impact investing, as it is called, is similar to socially responsible investing but seeks out companies targeting social and environmental problems rather than screening out those deemed harmful.

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  • Wealthy Attracted To Impact Investing

    via Financial Advisor Magazineby Bruce Fraser

    June 05, 2010

    Summary

    From original article:

    "Investors and financial advisors looking for a way to achieve social and environmental impact, as well as financial reward, might want to consider impact investing.

    Around the world, particularly in underdeveloped, poverty-stricken countries from East and West Africa, to Central America, to South Asia, impact investing is attracting wealthy investors. Impact investing attracted attention last year with the launch of the Global Impact Investing Network, or GIIN, based in New York, a collaboration platform and information hub designed to accelerate the development of impact investing in a more efficient, effective manner."

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  • With Impact Investing, a Focus on More Than Returns

    via New York Timesby Paul Sullivan

    April 22, 2010

    Summary

    Impact investing is discussed as a growing trend among wealthy individual investors in this New York Times 'Wealth Matters' column.

    From original article

    More often, impact investing is described by what it is not. It does not work in the same way as socially responsible investing, which excludes areas a person does not want to invest in - like tobacco or guns - through a simple screening process. Impact investing focuses more on bringing about change - helping the working poor in India buy a home, for instance.

    While most of the money is going into areas like helping to reduce poverty and improving the climate, it is not philanthropy. Investors expect at least a return of their capital with an adjustment for inflation and, in many cases, a lot more than that.

    In the piece, GIIN Director Camilla Seth offers perspective on why standards like the Impact Reporting and Investment Standards (IRIS) are needed in the impact investing industry:

    One of the main reasons for the slow growth is the lack of basic investing information. The Global Impact Investing Network is trying to remedy this. It has created standards to measure what a recipient says it is doing. "If an investor is trying to create jobs, the question is, 'How do I create more jobs?' " Ms. Seth said. "Everyone was measuring it in a different way. We want a job to be a job to be a job." She said the network had also built a reporting platform to track how investments were accomplishing their goals.

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  • Banks Making Big Profits From Tiny Loans

    via New York Timesby Neil Macfarquhar

    April 12, 2010

    Summary

    This front page New York Times article delves into the current conversation within the microfinance sector about the balance between social impact and financial returns.

    From original article

    [Microfinance] has grown so popular that some of its biggest proponents are now wringing their hands over the direction it has taken. Drawn by the prospect of hefty profits from even the smallest of loans, a raft of banks and financial institutions now dominate the field, with some charging interest rates of 100 percent or more.

    "We created microcredit to fight the loan sharks; we didn't create microcredit to encourage new loan sharks," Mr. [Muhammad] Yunus recently said at a gathering of financial officials at the United Nations. "Microcredit should be seen as an opportunity to help people get out of poverty in a business way, but not as an opportunity to make money out of poor people."

    The fracas over preserving the field's saintly aura centers on the question of how much interest and profit is acceptable, and what constitutes exploitation. The noisy interest rate fight has even attracted Congressional scrutiny, with the House Financial Services Committee holding hearings this year focused in part on whether some microcredit institutions are scamming the poor.

    * * *

    Underlying the issue is a fierce debate over whether microloans actually lift people out of poverty, as their promoters so often claim. The recent conclusion of some researchers is that not every poor person is an entrepreneur waiting to be discovered, but that the loans do help cushion some of the worst blows of poverty.

    "The lesson is simply that it didn't save the world," Dean S. Karlan, a professor of economics at Yale University, said about microlending. "It is not the single transformative tool that proponents have been selling it as, but there are positive benefits."

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  • Architects of a 'Social Investment Data Engine'

    via Financial Timesby Tom Stabile

    April 11, 2010

    Summary

    Tom Stabile of the Financial Times writes about the Global Impact Investing Network and the emergence of an impact investing industry that supports for-profit investment in funds and businesses that produce social or environmental benefits.

    From original article

    A new group is aiming to revolutionise the standard maths used to select investments for billions of dollars worth of assets by constructing a data engine that contrasts - and quantifies - the tangible social benefits of investing opportunities.

    The common recipe to judge an investment's relative worth often hinges on its performance against benchmarks or peers, but the new system's architects want to inject a measurement of social good into that valuation. The New York-based Global Impact Investing Network and its partners aim to introduce a broadly accepted arbiter to determine, for instance, whether 20 seasonal jobs on a Kenyan coffee farm produce the same social good as 20 full-time positions at a textile factory in Guatemala - and help investors use that information alongside financial returns data.

    The drive to build and pilot a taxonomy, database, portfolio management tool and rating system to standardise comparisons of social benefit started out in the "impact investing" world - a smallish community of organisations trying to bring capital to developing world business enterprises on the front lines of combating poverty and underdevelopment. The sector, which focuses on merging goals of generating both social good and financial returns, now has more than $50 billion (GBP 33 billion, EUR 37 billion) in assets, but an industry estimate sees potential for that volume to grow to $500 billion within the next decade.

    ***

    The target of GIIN's Impact Reporting and Investment Standards initiative are the masses who would be willing to choose investments based on their social benefit if only they had a credible way to measure it, says Sarah Gelfand, director of the IRIS project. The approach differs from better-known environmental-social-governance (ESG) reviews, because those tilt more toward analysing actions to minimise socially negative behaviour and often do not capture comparable, quantifiable data points.

    "The difference here is that we're trying to look at the proactive, mission-driven organisations that maximise positive impact," Ms Gelfand adds. "This absolutely is meant to build a market for the for-profit investing world to participate, and to use standards, auditing practices, and rating agencies that would make [impact investing] more accessible to the broader investment community."

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  • The Impact of Green Investing

    via Australian Broadcasting Corperationby Sue Lannin

    March 24, 2010

    Summary

    The Australian Broadcasting Network runs a story about environmentally-focused impact investing opportunities, and the growth of interest in impact investing.

    From original story:

    Concern about the impact of business on the planet has seen impact investing take-off overseas.

    That is when investors put money into funds or projects which solve environmental or social problems as well as generate profit.

    The Global Impact Investing Network is funded by private investors including the Rockefeller Foundation and the Bill and Melinda Gates Foundation.

    It works on improving standards in the impact investing industry.

    Louise O'Halloran, from the Responsible Investment Association, says environmental and socially themed investment funds are attracting high net worth individuals overseas.

    She says the time of the green fund is coming.

    "It's on its way. Very powerful people and very wealthy people want to find these kind of investment solutions where it's not a donation, it's not a conservation grant," she said.

    "What it is, is a vehicle that's been structured so they do get returns."

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  • Social Financial Engineering

    via Economist

    March 22, 2010

    Summary

    The Economist reports on the creation of an innovative social impact bond which will help fund education and support for ex-offenders. The bond was created through a partnership between the UK Ministry of Justice and Social Finance, whose Development Director is GIIN board member Toby Eccles.

    From original article:

    Britain's current, Labour government hopes that history will repeat itself with a new approach to public finance, for which it launched a pilot scheme on March 18th. Its big idea, which the opposition Conservatives are also keen on, is that the state issues "social-impact bonds" whose proceeds are applied to schemes to solve social problems. If they succeed they will save the taxpayer large amounts of money, a slice of which will be shared with the bond's investors. Doing something like this has long been a holy grail for financially-literate social engineers and socially-minded financial engineers, but this is thought to be the first time it has been piloted in national government.

    In the pilot scheme the bond will raise up to GBP 5m ($7.5m) to finance various private-sector organisations to work closely for six years with 3,000 short-term prisoners jailed in Peterborough, both inside prison and after their release, to help them resettle into the community. At present, prisoners like these have a tendency to reoffend and end up back in jail, costing government and society a fortune.

    The bond gives its investors a powerful incentive to finance organisations that will turn these ex-jailbirds into upright citizens. If they can reduce the rate of reoffending by at least 10%, the investors will be paid, the amount rising as the recidivism rate falls. If the payout is triggered - a 10% decline representing proof that the improvement is due to more than chance - the investors will earn a minimum internal rate of return of 7.5%, rising to a maximum of 13%, with payments made during years six and eight.

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  • Investors to Pay for Prisoner Rehabilitation

    via The Guardianby Peter Walker

    March 18, 2010

    Summary

    The Gaurdian reports on the creation of an innovative social impact bond which will help fund education and support for ex-offenders. The bond was created through a partnership between the UK Ministry of Justice and Social Finance, whose Development Director is GIIN board member Toby Eccles.

    From original article:

    Private investors will pay for a project to rehabilitate prisoners and receive a return on their money if reoffending rates drop, under a pioneering plan announced by the government today which could eventually the way much welfare work is financed.

    The pilot scheme for the so-called social impact bonds will see investors pay £5m towards intensive education and support for short-term prisoners leaving Peterborough prison in Cambridgeshire. A total of 3,000 will be helped over six years by the St Giles Trust, which specialises in working with ex-offenders.

    Under the deal between the Ministry of Justice and Social Finance, a private organisation set up by a group of City grandees in 2007, investors will make a profit if reoffending rates fall by 7.5% or more. Profits will increase according to how much money the government saves on not having to prosecute and jail recidivists, up to a maximum return of 13%.

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  • How banks can help the world's poor

    via Financial Timesby Op-ed: Alexander Friedman

    March 06, 2010

    Summary

    In this article, former CFO of Bill and Melinda Gates Foundation, describes four opportunities for foundations, banks, and governments to increase the flow of capital to the social sector.

    From original article

    These days, it has become something of a trend to demonise capitalists and praise philanthropists. But if we are to make true progress in tackling our most pressing social problems and live up to our moral obligation to help those in extreme poverty, these two seemingly polarised groups need to come together in fundamentally new ways.

    We need to stop separating investment decisions from philanthropic giving; the building and giving away of wealth should not be seen as disparate sets of skills. The world's problems cannot be solved either by unfettered markets or by limited pools of philanthropic dollars.

    Foundations, banks and governments are missing important opportunities that could dramatically increase the flow of capital to the social sector. In the last decade, new ideas have started to emerge that blend principles of giving and investing and are sometimes described as "venture philanthropy", "social impact investing" or "double bottom line" business. But, these innovations do not go far enough and the major players need to work together in a more coordinated fashion.

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  • Microfinance's Midlife Crisis

    via Wall Street Journalby Julian Evans

    February 28, 2010

    Summary

    As the microfinance sector reaches maturity, the balance between social impact and financial return becomes a more important topic for discussion.

    From original article:

    There is little doubt that microfinance is now big money. In 2008 it attracted $14.8 billion in foreign capital, up 24% from the previous year. For the first time, the majority of the money came from private investors - including pension schemes and private-equity funds - rather than governments, according to the World Bank.

    This deluge of private capital has freed many microfinance institutions from their reliance on donor funding. As a result some have switched from a not-for-profit strategy to a money-making business model. But there are concerns that such institutions are becoming distracted by the need to reward investors. Some microfinance banks have generated returns on equity of 50%; others have flooded the market with poorly structured debt.

    Maya Prabhu, head of philanthropy at U.K. private bank Coutts & Co., who advises wealthy clients on investments in microfinance, says: "There's a definite risk of new shareholders switching microfinance institutions' mission from alleviating poverty to chasing volumes and profits."

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