GIIN in the news Press releases

  • 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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  • How to Spend $10 Billion for Charity

    via Wall Street Journalby By Ben Wright, Yasmine Chinwala

    February 27, 2010

    Summary

    Just as foundations were instrumental in the development of microfinance, they play an important role in the broader impact investing industry. In this article from the Wall Street Journal, eight philanthropists tell how they would spend $10 billion dollars. Rockefeller Foundation President Judith Rodin and Apax Partners Founder Sir Ronald Cohen both discuss ways to use philanthropic capital to encourage private capital to address global challenges.

    From Dr. Judith Rodin's essay

    I would use the $10 billion in four areas: First, on equipping groups and governments with talent, technology and training so cycles of growth continue after funding dissipates. Second, on creating public policies that give people access to opportunity and help strengthen resilience in their neighborhoods, villages and cities.

    Third, investing in partnerships and networks that connect entities across disciplines and sectors, assuring that successful local innovations are more widely adopted. Fourth, finding new ways of mobilizing market and financial institutions that enable private capital to complement traditional resources.

    From Sir Ronald Cohen's essay

    $10 billion should be used to seed a powerful and effective social-investment sector across the world. This would boost social entrepreneurship, which is a tremendous new force for tackling social issues.

    Organizations whose primary focus is to achieve positive social outcomes are unable to access capital markets in the way normal businesses do. Such organizations need powerfully capitalized social-investment banks that can offer a combination of financial and social returns to a wide range of investors.

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  • 'Social loan' for Cause-based Groups

    via Financial Timesby Jonathan Guthrie

    February 20, 2010

    Summary

    A transportation business that provides bus service for students and workers from poor parts of London is following an equity model to raise funds. Bridges Ventures, Futurebuilders, and Rathbone Greenbank Investments are among the impact investors in the company.

    From original article

    HCT Group, a community bus business run by a Welsh former miner, is raising GBP 5m via a "social loan", a new form of debt designed to fuel the growth of the fledgling social enterprise sector. Backers include Bridges Ventures, the social investment business chaired by Sir Ronald Cohen, the veteran venture capitalist.

    HCT, originally called Hackney Community Transport after the working-class London borough where it is based, lists "social justice" as one of its prime objectives. Turnover has grown by about 25 per cent a year for the past eight years and is expected to top GBP 20m in the year to March 31, 2010, when profits will be around GBP 1m.

    The social loan will allow HCT, which operates bus routes in east London and the City and school buses in Yorkshire, to expand its fleet of 250 vehicles and staff of 500.

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  • Microfinance has The Makings of An Industry

    via Wall Street Journalby Alok Mittal

    February 17, 2010

  • Investors bet money on for-profit social enterprises

    via Economic Timesby Archana Rai

    February 09, 2010

    Summary

    Venture capital is being used in India to fund affordable healthcare, dairy farming, and a literacy program for poor children.

    From original article

    The main purpose is social upliftment, but there is an important twist. Each project follows a "for-profit" model, is expected to show revenues and profit annually, and is backed by venture capitalists looking for decent returns.

    Following the model pioneered by microfinance institutions, a group of entrepreneurs across the country are setting up firms that seek to fulfil the twin aims of making profit while providing social uplift. From being on the fringes of the consciousness of urban Indians, the "other India", which includes dairy farmers in rural Orissa, youth in Uttarakhand and fisherfolk like the Fernandez family, are taking centre stage. Investors are putting money and giving attention to what is now being referred to as the business of social good.

    "We are right at the inflexion point and will see the emergence of more social ventures that will raise commercial capital to build for-profit businesses and investors willing to take the risk of investing in such enterprises," says Vineet Rai, founder and chief executive officer of Aavishkaar Venture Management Services, who pioneered the trend of making risk capital available to entrepreneurs aiming at helping society with their business.

    Unlike earlier, when philanthropic capital was used solely to create livelihood and products that the poor could afford, this new wave of enterprise works like a business corporation with a profit motive, while attempting to retain the essential social purpose.

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  • Technology

    via Financial Timesby Sarah Murray

    January 25, 2010

    Summary

    Impact investment into Global Easy Water Products, a for-profit company which has developed a manually-operated drip irrigation system, is benefiting hundreds of small holder farmers in India.

    From original article

    Global Easy Water Products (GEWP) has done this in India for farmers who operate plots of between one and four acres, often in places where water is increasingly scarce.

    "We know farmers whose fathers never had a problem with their bore wells and now they're finding they don't have enough water to take care of their fields," says Katie Hill, the Hyderabad-based India portfolio manager at Acumen Fund, the social venture fund that has invested in GEWP's technology.

    The company has developed a drip irrigation system that consists of a bicycle-tyre inner tube and requires no electricity for the pumping mechanism but instead has a foot-pedal pump.

    "It's labour-intensive but the one thing poor farmers often do have at their disposal is labour," says Ms Hill.

    According to Acumen Fund, the system has raised the income of smallholder farmers by an average of $400 a year, increases crop yields by 30 to 70 per cent and delivers water savings of between 30 and 50 per cent.

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  • Case Study

    via Financial Timesby Sarah Murray

    January 25, 2010

    Summary

    Impact investing and development aid together fund a solution to malnutrition in Kenya.

    From original article

    Soon, low-income families in Kenya will be able to add to their diet a pre-cooked porridge product that is rich in proteins and vitamins and supplies the nine essential amino acids required by the human body.

    The porridge will not be delivered under the auspices of an aid agency or a government-funded programme.

    Most families will buy it as part of a revenue-based approach to attacking malnutrition.

    ***

    Acumen Fund's investment will, over the next six years, allow Insta to establish a local factory to produce and distribute up to 12,600 tonnes of the porridge a year.

    It will also help pay for product launches and marketing campaigns.

    The porridge will be priced so that it is affordable for low-income families, with 25 US cents buying a 100-gramme packet that provides a nutritional meal for four.

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  • MetLife/NCB Capital Impact provide $5M loan to state's community health centers

    via San Francisco Business Timesby Chris Rauber

    January 11, 2010

    Summary

    MetLife and NCB Capital Impact recently announced they've provided $5 million in capital via a "social investment loan" to California community health centers.Their goal of these investments is to help preempt a potential decline in health services for vulnerable populations due to the state's budget crisis.

    From original article:

    The initiative is part of NCB Capital Impact's $75 million, three-year "Healthier California" program, the organizations said Jan. 12. MetLife provided a $5 million social investment loan with favorable terms and conditions to support the initiative.

    Funds will be used to finance community health centers statewide, and were made possible under the California Organized Investment Network, a state Department of Insurance program that provides incentives for investments in California Community Development Financial Institutions.

    ...Nationally, community health centers serve more than 17 million patients, about 40 percent of whom have no health insurance, the statement said. In California, where one in five residents is uninsured, the centers attract more than 11 million patient visits annually to 800 sites.

    Arlington, Va.-based NCB Capital Impact has loaned or invested $500 million for community health centers nationally, according Terry Simonette, its president and CEO.

    Program Related Investments, and other so-called mission-related and social investments are said to combine the resources of social investors with impact investment funds from private investors so community development organizations can increase the flow of capital to low-income communities. At the end of the investment period, the social investor gets the capital back so it can be used for more communities in need.

    Since 1997, NCB Capital Impact has received $50 million in PRIs resulting in $110 million of financing in low income communities nationwide to increase access and quality of health care, education and affordable housing.

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  • Meet Gordon Gekko's Grandchildren

    via Wall Street Journalby David Weidner

    December 09, 2009

    Summary

    A profile of GIIN Investor's Council member, Acumen Fund, an Acumen Fund fellow, and Acumen investee D.Light.

    From original article:

    Much of this demand is being fed by a new generation of financiers and entrepreneurs. Jacqueline Novogratz, Acumen's founder and chief executive, says interest in her organization is mounting. The fund has $40 million invested in 44 projects in East Asia and South Africa.

    D.Light is one of those. Other than the social half of its mission - the other half being profit - it's a traditional venture-funded startup that, if not today, is very close to achieving profitability.

    "There's a convergence that's happening with Wall Street and banks looking to extend what they do," Ms. Novogratz says, "and governments and nonprofits becoming more businesslike on the other side."

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