Sustainable solutions for the poor: Global Partnerships
Site Latin America and the Caribbean
Sector Impact investing
Challenge To work with social enterprises, including microfinance institutions and agricultural cooperatives, to create more opportunity for people living in poverty.
Solution An OPIC loan to the Global Partnerships Social Investment Fund 5.0 will support lending to local social enterprises that combine financial support with additional non-financial services such as education and training and healthcare.
Impact Seattle-based Global Partnerships has a solid track record of successful fund management. OPIC has lent to four of its past five funds, including one which has matured and been repaid in full. Its investments have served 1.1 million people in 10 countries, more than half who live in rural areas. Approximately three-quarters of its borrowers are women.
Poor people need more than just money
Microfinance lending is one of the most effective ways to get goods and services into the hands of the world’s poorest people, who often do not have access to traditional bank loans. It is also one of the core ways that OPIC carries out its mission to channel private capital to address the world’s toughest development challenges.
Integrating credit with other social services which can truly help these poor communities is challenging. By working with trusted fund managers such as Global Partnerships, OPIC can help these microfinance institutions and other social enterprises create more opportunities for people living in poverty.
Since 2006 OPIC has provided four loans to support Global Partnerships, a Seattle fund manager that invests in poor communities in Latin America and the Caribbean by partnering with local microfinance lenders and other community groups. In December 2012, OPIC entered into its most recent agreement to lend $15 million to the Global Partnerships Social Investment Fund 5.0, which will on-lend to what it deems creditworthy social enterprises working to improve the lives of people living in poverty. The fund aims to generate both financial and social returns.
After nearly 20-years of investing in Latin America, Global Partnerships regularly adapts its investment strategy to incorporate its lessons learned from past investments. “A key finding,” says Director of Investor Relations Jason Henning, “is that people living at the base of the economic pyramid need more than just credit.” Increasingly, Global Partnerships integrates credit with other essential services and in the Social Investment Fund 5.0, it determined to focus its investing on institutions that provide services in four key areas:
- Health services – preventive education, regular screenings, affordable & essential care
- Rural livelihoods – crop technical assistance, improved access to specialty markets, reduced input and processing costs
- Green technology – accessible green technologies that save households money and time, improve living conditions, and are better for the planet
- Microentrepreneurship – financial literacy and business education
Global Partnerships’ strong track record and OPIC’s value added
“Our theory is that organizations that excel on social services also have really strong financial performance,” said Henning. “We are trying to catalyze the capital markets to flow towards these sustainable, high-impact, mission-driven enterprises.”
In previous investments, Global Partnerships has successfully supported all of these areas through investments like the following:
- ESPOIR, a microfinance institution in Ecuador, which provides microenterprise credit along with basic health education and financial literacy to women. Women gather at monthly client meetings where they pay their bills and receive health education classes and discounted healthcare products and services.
- Crediflorida, a 6,000 member fair trade coffee cooperative in Peru that gives members access to technical assistance on topics such as farm administration, health education as well as access to credit.
- Fondo de Desarrollo Local, a microfinance institution in Nicaragua that provides financing with flexible repayment terms, so families located off the main electrical grid can buy solar panels and related products to power their homes and farms.
Global Partnerships combines the loan money provided by OPIC with funds raised by other investors including high net worth individuals and foundations who are seeking to generate financial and social returns. While it raises money from different sources, it says that OPIC’s participation is a critical ingredient to the mix and helps to attract additional private investors. “OPIC’s involvement is a stamp of credibility and by locking in a fixed interest rate it has given us a lot of stability in terms of overall cost structure,” said Henning.
This project was profiled in 2013