MicroPlace, a wholly-owned subsidiary of online marketplace company eBay and an affiliate of eBay's online payment division PayPal, is attracting attention from a growing number of investors seeking modest returns while helping alleviate global poverty.

Since its inception in 2007, MicroPlace's Web-based platform has had nearly 13,000 investors who've purchased investments offered by issuers that fund microfinance projects around the world. Lifetime investments (matured and outstanding) total $50.14 million.

Roughly half of those investments have been in investment notes with maturities of one year or longer, and the other half had been invested in a product with daily liquidity that's no longer available. The San Jose, Calif.-based company facilitates payments between investors and these issuers but plays a non-custodial role.

MicroPlace, whose business plan was created by founder Tracey Turner and sold to eBay in 2006, was established as a broker-dealer in order to pay investors a return.

Returns on the more than 30 state-registered securities it currently offers range from 0.5% to 4%, says Art Stevens, general manager of MicroPlace.

"It's a true investment-both sides receive a benefit," says Stevens, who recently spoke to FA at length about MicroPlace. "We're trying to balance the head and heart."
One factor that distinguishes the company from many other impact investing opportunities is its relatively low entry point. Some of its issuers require a minimum investment of just $20.

"We're trying to democratize impact investing to where a much broader population can put it in their pocket," says Stevens.

Also notable is that half of MicroPlace's investors are age 40 or younger-an unusual demographic for a brokerage firm. The eBay/PayPal backing, which provides MicroPlace with tremendous scale and resources, gives investors a lot of confidence, he says.

Five Issuers
It's easy to find projects to invest in through MicroPlace's Web site. Investors can click on causes (rural areas, women, green and fair trade) and countries they'd like to assist, or on desired returns and repayment periods. The site also indicates the interest rates and maturity dates offered by specific investment vehicles and, in some cases, the number of people that can be helped in a community through a $1,000 investment.

MicroPlace doesn't charge investors a fee, but it does charge a fee to the issuers on its platform.

The company says it completes rigorous due diligence on issuers before deciding to work with them. Factors it examines include their mission, experience and track record in microfinance. It also looks at an issuer's financial health, staffing, business strategy, risk management policies, portfolio management policies, compliance processes, operations, and methodology for selecting which microfinance projects will receive loans.

MicroPlace currently works with five non-profit issuers: Oikocredit USA, FINCA International (the group's official name, which stands for Foundation for International Community Assistance), Working Capital for Community Needs (WCCN), Shared Interest and the Calvert Foundation. WCCN focuses on Latin America and Shared Interest focuses on South Africa, while the other issuers sport a broader focus.

Domestic Help
Although many investments offered through the MicroPlace platform are geared towards helping disadvantaged communities overseas, the company is expanding its domestic offerings this fall in response to investor demand, says Stevens.

One domestic option is the California Freshworks Fund, accessible through Calvert Foundation Community Investment Notes to residents of most states. The public-private partnership loan fund supports healthy food access in low-income California communities by financing grocery stores and other forms of healthy food distribution. It pays 1% annual interest and matures on June 15, 2014.  

Stevens says MicroPlace has never had an issuer fail to make a payment on interest or principal, although he cautions that past performance doesn't guarantee future results. MicroPlace encourages investors to read investment prospectuses and provides links on its Web site.

Jennifer Lazarus of Lazarus Financial Planning, a fee-only advisory practice for socially responsible investors in Durham, N.C., describes MicroPlace's issuers as "solid" and is comfortable introducing clients to the platform for their cash and philanthropy needs.  She says about 10% of her current clients have approximately 10% of their money invested there today.

"Everyone needs an emergency fund and it's very easy to park your cash in a community development financial institution," she says. Some of her clients have built what she calls certificate of deposit ladders at MicroPlace, with a string of investments maturing about a year apart.

Lazarus sees MicroPlace as a good way for investors to slowly build their philanthropic sleeve, and she thinks it can be easier for people to be more generous with their money when they're lending it out and it keeps working for them.

She also likes that MicroPlace offers the smaller investor a wide selection of investment options at lower denominations and puts them all on one electronic statement.

Lazarus says some clients have told her, "Wow, this is so cool. I didn't know anything like that existed." She says she has personally used the platform to invest in a number of countries where she feels a connection, including Indonesia and Brazil--places where she spent part of her childhood. She also thinks selecting MicroPlace investments would be fun for parents to do with their children.

Stevens, who arrived at MicroPlace earlier this year from the Calvert Foundation and served as a project manager on the Gateways to Impact Industry survey, says he welcomes questions from financial advisors.

"Our goal is to have conversations with advisors about impact investing in a language they can understand," he says. "We want to be an entry point to start conversations between advisors and clients, and we want to help them connect with the next generation of customers."