Make your money make a difference–and enjoy attractive returns
Small Money, Big Impact explores and explains the globally growing importance of impact investing. Today, the investor’s perspective has become as important as the actual social impact. Based on their experience with over 25 million micro borrowers, the authors delve into the mechanics, considerations, data and strategies that make microloans and impact investing an attractive asset class. From the World Bank to the individual investor, impact investing is attracting more and more attention. Impact investing is a global megatrend and is reshaping the way people invest as pension funds, insurance companies, foundations, family offices and private investors jump on board. This book explains for the first time how it works, why it works and what you should know if you’re ready to help change the world.
Impact investing has proven over the last 20 years as the first-line offense against crushing poverty. Over two billion people still lack access to basic financial services, which are essential for improving their livelihood. Investors have experienced not only social and environmental impact, but have received attractive, stable and uncorrelated returns for over 15 years. This guide provides the latest insights and methodologies that help you reap the rewards of investing in humanity.
* Explore the global impact investing phenomenon
* Learn how microloans work, and how they make a difference
* Discover why investors are increasingly leaning into impact investing
* Consider the factors that inform impact investing decisions
Part social movement and part financial strategy, impact investing offers the unique opportunity for investors to power tremendous change with a small amount of money– expanding their portfolios as they expand their own global impact. Microfinance allows investors at any level to step in where banks refuse to tread, offering opportunity to those who need it most. Small Money, Big Impact provides the expert guidance you need to optimize the impact on your portfolio and the world.
Inhoudsopgave
Foreword ix
Preface xi
Acknowledgments xiii
About the Authors xv
CHAPTER 1 Introduction 1
1.1 Fighting Poverty 2
1.2 Investing in Financial Infrastructure 7
1.3 Content Overview 8
Notes 9
CHAPTER 2 Microfinance – the Concept 11
2.1 History 12
2.2 Definition and Goals 15
2.3 Double Bottom Line 18
2.4 Financial Inclusion 21
2.5 Market Participants 24
2.6 Impact Investing 25
2.7 Preliminary Conclusions 29
Notes 31
CHAPTER 3 The Microfinance Value Chain 33
3.1 The Protagonists and Their Tasks 34
3.2 Regulatory Environment 36
3.3 Development Finance Institutions 37
3.4 Market Overview 39
3.5 Geneva: Birthplace of Modern Microfinance 42
3.6 Preliminary Conclusions 46
Notes 47
CHAPTER 4 Micro Entrepreneurs 49
4.1 Definition 50
4.2 Needs and Requirements 52
4.3 Micro Entrepreneurs 59
4.4 Preliminary Conclusions 67
Notes 68
CHAPTER 5 Microfinance Institutions 71
5.1 Definition and Goals 72
5.2 Types of MFIs 73
5.3 MFI Funding 76
5.4 Services 85
5.5 Regulation 88
5.6 Preliminary Conclusions 94
Notes 96
CHAPTER 6 Lending Methodologies 99
6.1 Traditional Credit Theory and Microfinance 100
6.2 Lending Methodologies 101
6.3 Socio?-Economic Factors 104
6.4 Late Payments and Over?-Indebtedness of Clients 108
6.5 Default Prevention and Restructuring 110
6.6 Occupation: Loan Officer 113
6.7 Preliminary Conclusions 114
Notes 116
CHAPTER 7 Loan Pricing 119
7.1 Interest Rate Components 120
7.2 Setting Sustainable Interest Rates 127
7.3 Regional Differences 127
7.4 Loan Recipients’ Willingness to Repay 129
7.5 Preliminary Conclusions 130
Notes 132
CHAPTER 8 Social Performance Management 133
8.1 Social Performance 134
8.2 Measuring Social Performance 135
8.3 Measuring the Outcome of Microfinance 149
8.4 Social Rating Agencies 151
8.5 Technical Assistance 153
8.6 Linking Social Performance with Profitability 156
8.7 Preliminary Conclusions 157
Notes 159
CHAPTER 9 Beyond the Reach of Microfinance? 161
9.1 Prejudices and Reservations 162
9.2 Preliminary Conclusions 171
Notes 172
CHAPTER 10 Investing in Microfinance 175
10.1 Market Development 176
10.2 Microfinance Investment Vehicles 177
10.3 The Investment Process 181
10.4 Loan Agreements and Pricing Policy 187
10.5 Microfinance in the Overall Investment Portfolio 191
10.6 Incentives for Investing in Microfinance 195
10.7 Preliminary Conclusions 197
Notes 199
CHAPTER 11 Real and Financial Economy 201
11.1 Microfinance Is Crisis?-Proof 202
11.2 Real Economy and Local Influencing Factors 203
11.3 Financial Economy 205
11.4 Stability Mechanisms 207
11.5 Preliminary Conclusions 208
Notes 209
CHAPTER 12 Discussion of Results and Conclusions 211
12.1 Win?-Win?-Win 212
12.2 Onwards and Upwards 212
Notes 215
APPENDIX A Example of a Loan Application 217
APPENDIX B Due Diligence of Socio?-Economic Impact Factors 221
List of Abbreviations 227
Glossary 229
References 233
Photo Credits 243
Index 245
Over de auteur
PETER A. FANCONI is the Chairman and former CEO of Swiss-based Blue Orchard Finance, one of the leading asset man- agement companies in impact investing. Peter demonstrated his entrepreneurial and social competences in various positions, including CEO of the Vontobel Private Bank, CEO of Harcourt Alternative Investments and managing partner at Pw C. He also serves as Chairman of Swiss bank Graubündner Kantonalbank (GKB) and as board member of academic and charitable institutions worldwide. Peter is a renowned lecturer and published writer in the field of finance and impact investing.
PATRICK SCHEURLE is the CEO of Blue-Orchard Finance. Prior, he acted as COO and CFO at Blue Orchard. His broad experience in finance includes senior positions at Bank Vontobel and Credit Suisse. He further served with a leading management consultancy focusing on governance and value creation. Patrick holds a Ph D in finance from the University of St. Gallen, Switzerland, where he also held an assistant professorship. He is the author of several well-known finance books and regularly publishes on developments and research in impact investing.
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