Many individuals may like the idea of investing in the little guy—the butcher, the baker, the solar-powered candlestick maker—but with minimums typically in the $250,000 to $500,000 range, investment in microfinance has generally fallen to large institutions and the super-rich. ImpactAssets would like to change that. 

The Bethesda, Md.-based nonprofit financial services firm has created two debt securities, the Microfinance Plus Note and the Global Sustainable Agriculture Note, aimed at retail investors and designed to be sold through wealth management platforms and brokerages. Both products have a minimum investment of $25,000 and a five-year duration. There’s also a liquidity feature beginning midway through the five years, which provides semi-annual redemption periods that allow an investor to recover as much as 100% of her investment, as long as all redemptions during the period don’t exceed 10% of the total proceeds.

The target return is 3% on the microfinance note, and 2.75% on the sustainable agriculture note. Custodians that accept delivery for client accounts include Fidelity, JP Morgan, National Financial Services, Charles Schwab, State Street (for institutional investors) and U.S. Trust. 

Microfinance typically signifies an investment in some sort of financial institution that provides small amounts of capital to poor populations in developing countries. The Microfinance Plus Note works like this: Investors buy the note, and the portfolio manager, MicroVest Capital Management in Bethesda, Md., invests that money in financial institutions that offer loans and other services to poor entrepreneurs such as shop owners, florists and bakers in places such as Cambodia and Ecuador. 

“Globally there are more than 2.5 billion people who don’t have a formal banking relationship, and most of them are in developing countries,” says Fran Seegull, chief investment officer at ImpactAssets. “This creates a huge opportunity for us. There’s a lot of unmet need.”

 Indeed, microfinance loan portfolios grew from $3 billion in 2001 to $100 billion in 2012, and experts estimate untapped growth opportunities of up to 12.5 times that amount, according to a March 2015 report from the World Bank Group.

Another selling point: “Microfinance also has a very low correlation to other asset classes, so we see it as a potential hedge for some portfolios,” Seegull says. “And there’s a very low default rate. The idea that the poor are bad credit risks is something that microfinance really debunks.”

The Global Sustainable Agriculture Note, managed by Belgium’s Alterfin, invests in grower cooperatives and agricultural enterprises—a coffee cooperative in Honduras, for example, and a honey exporter in Chile—that help smallholder farmers increase and stabilize their incomes and farm in a productive, sustainable way. These co-ops then create relationships with big corporations that sell their products, like the fair-trade coffee you buy at Starbucks or Trader Joe’s. 

“There’s been a huge amount of growth in fair trade and in the consumption of organic food and beverages,” Seegull says. “And there’s also a desire to move the dial for the rural poor in emerging markets. So we see this great opportunity with sustainable agriculture.”

More than 70% of individual investors are interested in sustainable investing, according to the Morgan Stanley Institute for Sustainable Investing. 

First « 1 2 » Next