Our family recently decided to put some savings to work for social good … more particularly for helping out extremely poor entrepreneurs. We made two investments. Yes, investments, not donations. We didn’t get a charitable contribution receipt and we expect to get our investment monies back with earnings.
1. Unitus Equity Fund (UEF). This is a very innovative private equity fund just launched by Unitus — the global microfinance accelerator. UEF recently made the first close of US$9 million on an expected US$20 million fund. We chose this fund because it is the first (that I’m aware of) equity fund which has the following combination of characteristics: (a) raising purely private monies, (b) focused exclusively on equity (not debt) investments in microfinance institutions (MFIs), and (c) focused on very high-growth MFIs (= providing microfinance to the poor who are not currently served.) The fund is structured like a venture capital fund so your money is locked up (providing immense poverty impact) for up to 10 years and they’re targeting a return of 8-12% per annum … not bad! Our hope is that UEF will be successful as a demonstration effect for social investing and encourage more private capital to flow to social enterprises. I’ll write in a separate post about why equity investments are so critical going forward for MFIs.
2. MicroVest mPower Investment Program. MicroVest was founded by three non-profit institutions: CARE, MEDA and Seed Capital Development Fund to focus on capitalizing microfinance institutions. They have setup shop with Calvert Foundation to administer a debt fund called mPower. You make an investment (min. US$1,000), pick a term (1-10 years) and then pick an interest rate (0-3%) to be paid each year. This is a lower risk type investment (more like a bond.) The monies are then lent out to MFIs who in turn lend these monies to poor entrepreneurs. The entrepreneurs then repay their loans to the MFI, the MFI repays MicroVest and then MicroVest repays you, the investor. It is amazing to think that your savings can actually be put to work helping poor people in another country whom you will likely never meet!
So, finally, we’ve put our money where our mouth (really, heart) is.