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Q&A with Rick Beckett: Global Partnerships' investment strategy
Global Perspectives | Summer 2010
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Editor's note: On the eve of Global Partnerships' first
Social Investor Forum on June 8, we sat down with
President Rick Beckett to talk about GP's microfinance
investment funds. |
| GP Microfinance Funds at a glance |
- Number of funds launched since 2005: 3
- Amount of most recent fund: $20 million
- Number of MFI partners before our first fund: 4
- Number of MFI partners today: 27
- Number of borrowers reached through MFI partners: 817,000
- Percent of investors repaid in full and on time: 100%
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Growth of GP fund capital at work |
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Global Partnerships (GP) has launched three microfinance investment funds that have accelerated the amount of capital GP is able to invest in Latin American microfinance institutions. What was the genesis of this strategy?
The fund strategy was driven by the
belief that there was never going to be
enough philanthropic capital available
to expand microcredit to reach
everyone who needs it. With our first
fund, the $2 million 2005 fund, the
aim was quite simple—to demonstrate
that you could use investment dollars
rather than philanthropic dollars
as capital, loan it to microfinance
institutions (MFIs) and get it back.
How have the funds evolved in recent years?
As we moved into the 2006 and 2008 funds, and even more so with our upcoming 2010 fund, we have really sharpened our fund structure, designing funds with different combinations of financial return, social return and risk that appeal to different types of investors. For example, development banks such as the Inter-American Development Bank (IDB) invest in our funds in part because it advances their mission to stimulate economic development in Latin America. Foundations invest to align their portfolio with their mission. And the combination of low risk, high social impact and modest financial returns that our funds offer attract individual and institutional investors, such as Seattle University. Donors also participate in an essential way by contributing to the base “equity” layer that makes the fund possible. That’s the genius of the fund structure now—it’s not one size fits all.
How does GP’s investment fund strategy compare to that of other organizations that offer microfinance investment funds?
I would distinguish us in that GP is consciously building a portfolio of social enterprise MFIs, meaning microfinance organizations that are profitable but deeply committed to social impact. Our MFI partners reinvest their profits in programs that either help them be more inclusive—that is, being affordable or reaching underserved markets—or more innovative, combining microfinance with education, health programs, rural development or small enterprise development.
In contrast, most microfinance fund capital flows to commercial microfinance institutions, which are profitable and doing some good work, but not reaching the most vulnerable people and not driving social innovation.
How has the field of social investing changed?
The first take on socially responsible investing was essentially the idea of “Do less harm”—socially screened investments. Increasingly, investors are saying, “It’s not just that I don’t want my money invested in tobacco or alcohol or firearms, it’s that I want my resources used to make the world a better place.” In GP’s case, more investors are realizing that all microfinance isn’t created equal and so we’re getting into discussions about why it’s important to reach underserved populations and to fund microfinance programs that offer services beyond microcredit to achieve higher impact.
Have Global Partnerships’ funds been successful?
In five years we’ve been able to go from under a million dollars in capital invested to $39 million to date, with another $20 million around the corner. As for financial performance, we’re currently invested in 27 microfinance institutions and every one of them has paid back their loans on time. As the saying goes, “current performance is not a guarantee of future performance,” but it’s promising in terms of our focus on creating a fully sustainable model.
What’s exciting to you right now about the microfinance programs that GP is investing in?
I like the combination of microfinance with health education and services to fully leverage the village bank channel for reaching lots of people. I’m intrigued by the opportunity to use microfinance in concert with investment in economic development—fair trade cooperatives, rural small enterprise—to move the needle on income expansion and job creation for people living in poverty.
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