There is a large number of “traditional” investors whose priority is strictly earning the greatest financial return, regardless of any return in the form of positive social impact. This week the Case Foundation and Entrepreneur.com, in partnership with ImpactAlpha are spotlighting MicroVest, an asset management firm that has been proving for more than a decade that investments in underserved markets are more than just charity. These impact investments can and do earn consistent and competitive financial returns, in addition to enabling local entrepreneurs to create scalable solutions that drive even greater positive outcomes.
MicroVest was founded in Bethesda, MD, in 2003, with CEO Gil Crawford’s belief that “investing in unbanked markets is the best way to reduce poverty on a global scale.” The firm does this by providing capital to low-income financial institutions that in turn make loans to micro to medium-sized businesses.
During MicroVest’s early days, micro-loans were not new, however they were not widely known or understood. This disconnect led to some early stage struggles in gathering investments for MicroVest’s first fund. Chairman Bowman Cutter explained to the Wall Street Journal that the first $15 million was more difficult to gather over three years than $15 billion for a private equity firm. However, MicroVest’s stable record for returns has helped to eliminate much of the investor trepidation and it has successfully grown the fund’s investor pool and diversified its portfolio of companies over the years.
According to Impact Investing2.0, two such examples of the diverse investments available through MicroVest are XacBank (“Hass-Bank”) in Mongolia that serves 26,000 borrowers through 34 urban and rural banks, capitalizing on the innovative microfinance structures already present in the country. Additionally, MicroVest became an important investor in a low-income finance institute in Guayaquil, Ecuador where they were able to incentivize more responsible lending practices through local banks. Through most of MicroVest’s local lenders, the majority of borrowers are women, empowering a traditionally marginalized portion of these communities.
Given the financial and social progress of micro-investments and other impact investments, many are turning toward impact investments to secure both financial and social returns. Ron Cordes, who leads the Cordes Foundation, one of Microvest’s owners, notes that MicroVest and similar firms and funds are successful because of, not despite their, social impact. To find out how MicroVest intends to continue to engage with and attract more of investors through competitive returns, check out the rest of the story on Entrepreneur.com.