NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, March 30, 2009

Root Capital announced today that it has launched a comprehensive Growth Capital Campaign that will significantly increase its capacity to serve rural grassroots businesses in developing countries by establishing a sustainable social enterprise and fully self-sufficient lending program by 2013. The five-year $63 million campaign includes a unique combination of Philanthropic Equity and Debt Capital and will accelerate the organization’s ability to impact global poverty by linking rural small and growing businesses with capital markets. Specifically, the campaign will allow Root Capital to triple its loan portfolio, enabling it to lend $121 million each year to more than 350 grassroots businesses, representing one million households.

Root Capital, a nonprofit social investment fund that is pioneering finance for rural communities, provides capital, financial training and market connections to grassroots businesses – such as farmer and artisan cooperatives – that build sustainable livelihoods and transform rural communities in poor, environmentally vulnerable places. Since its launch in 1999, Root Capital has provided more than $120 million in loans to 235 small and growing businesses, representing 360,000 individuals in 30 countries throughout Latin America and Sub-Saharan Africa. It has maintained a 99% repayment rate from its borrowers and a 100% repayment rate to its investors.

“We are excited about this opportunity to scale our impact on global poverty and to provide our investors and funders with a tool that transparently documents our progress towards sustainability,” said William Foote, Founder and CEO. “In addition to increasing our direct financing and training services, we will also be in a position to better influence local financial institutions to adopt our lending model, further increasing our impact.”

With funding from The Rockefeller Foundation, Root Capital developed the Offering in partnership with the Nonprofit Finance Fund. “Rarely does a philanthropic investment so clearly lead to such highly leveraged and fully self-sustaining impact,” said George Overholser, Founder and Managing Director of NFF Capital Partners at Nonprofit Finance Fund. “Upon completion of this Growth Capital Campaign, Root Capital will be able to leverage the same amount of philanthropic equity to directly serve five times the number of small-scale producers than they currently serve.”

Root Capital expects to gain support for the Growth Capital Campaign from a variety of investors, including foundations, corporations, socially responsible investment firms and individuals. Funders and investors already committed to the Offering include The Kendeda Fund, The Rockefeller Foundation, and the Skoll Foundation. In addition, The Prudential Insurance Company of America is in the final stages of its commitment process.

Judith Rodin, President of The Rockefeller Foundation, stated, “We are so impressed by Root Capital’s unique business model and strategic growth plan that we wanted to be one of the first investors in their Offering. We hope other investors will join us in supporting the critical work Root Capital is doing in the emerging investing industry. By taking its business model to scale, Root Capital will demonstrate that impact investments can aid philanthropy in catalyzing sustainable economic growth in rural communities around the world.”

The Skoll Foundation, a partner of Root Capital’s since 2005, is investing in the Offering with both Philanthropic Equity and Debt Capital. “By empowering small and growing businesses with the financial support and skills needed to succeed, Root Capital has demonstrated that it has a systematic and sustainable approach to reducing global poverty and environmental degradation,” said Sally Osberg, President and CEO of the Skoll Foundation. “We are proud to be one of the anchors of their Growth Capital Campaign and look forward to our continued partnership.”