MicroVest Sees Microfinance Shifting to Small Business
By Abby Schultz
Microfinance—the business of investing in financial institutions that make loans to low-income entrepreneurs in developing countries—is a form of investing for social good that long predates the decade-old impact investing market.
Today, microfinance is a key part of many impact portfolios, representing 9% of assets held by impact investors surveyed by the Global Impact Investing Network, or GIIN.
But for MicroVest, a 15-year veteran fund manager in the sector, the practice of investing in microfinance institutions is shifting from “classic” microfinance—providing loans to individuals selling vegetables at a local market, for example—to investing in small businesses, a sector MicroVest says is often under-served.
“What happens when the woman borrower who started with a $200 loan has built her business and has 10 employees and now needs $5,000 in capital to buy equipment and machinery?” asks Ron Cordes, the former co-founder and executive co-chairman of AssetMark, who has invested in MicroVest through his family foundation since 2007.
Photo courtesy of GotCredit.