"MicroPlace is like the Schwab of microfinance. They're the holder of many microfinance investment options," says Jennifer Lazarus, a CFP licensee in Durham, N.C.
Lazarus says the Calvert notes are what she'll usually put into someone's portfolio if they're interested in this asset class. They have a relatively low return, but it's a fixed, stable return, and they're easy to put in a portfolio. They're on everyone's platform, she says. She likens it to a CD. Her clients invest $1,000 or more, choose a time period-one, three, five, seven or ten years-and depending on how long they're willing to tie up their money, they can earn from 0% and 3%.
Most of her clients are socially responsible investors. Since nearly all of the microfinance investments currently available are debt and not equity, Lazarus tends to use them as part of her clients' bond portfolio.
"I do want to make clear that when I talk to people about MicroPlace and microfinance, it is for people who are looking for a way to use their capital to meet their philanthropic goals. The returns are not designed to be competitive financial returns," Lazarus says.
And there's the rub. While returns on some of the institutional products currently available in the microfinance arena are in the high single digits, the retail products are limited and often pay poor returns.
"If you're talking wealthy individuals, who are usually accredited investors, generally a lot of the [microfinance investment vehicles] are open to them," says Robert Summers, editor of MicroCapital Monitor, a Boston-based newsletter covering the microfinance industry. "If you're somebody with $1,000 from your IRA, then you have two, three, maybe four choices."
Wealthier investors, for instance, can buy seven-year collateralized debt obligations, in increments of $50,000 to $100,000, that might invest in, say, 60 microfinance institutions that then make small loans to poor people. The return? As much as 7%-far more than the retail products are paying.
"Calvert notes are popular for clients who are socially responsible investors. The big problem is they pay 3%. And the big advantage is that they pay 3%," says Howard Finkelstein, an attorney who has worked in the microfinance area for a decade.
Finkelstein says that, despite Calvert's low returns, at least they're consistent-something he's found in other microfinance deals. He says he helped structure one deal back in 2007, and a year later he bumped into someone from a U.S. bank who had invested $1 million in it. The banker says it was the best investment he'd made that year.
"Not one investor has lost a penny on these deals," Finkelstein says.