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

Since it was launched 10 years ago, Grameen America has been funded mainly by traditional philanthropy and concessionary capital from foundations, charitable organizations, individual investors and commercial lenders. Although traditional philanthropy will always be core to Grameen America’s funding, we see impact investing as an untapped opportunity for our organization and one that increasingly holds the interest of our supporters.

With that in mind, I was thrilled to celebrate Grameen America’s 10-year anniversary of supporting female entrepreneurship and financial inclusion across the United States by announcing one of our most exciting initiatives to date: our first-ever Social Business Fund. The fund, which closed at the end of 2017, allowed our supporters to directly invest in the success of more than 100,000 entrepreneurs.

This vehicle gives our supporters the opportunity to make a socially meaningful investment that also provides them with a financial return. In so doing, they have and will maintain a vested interest in our organization’s growth and our ability to change the lives of low-income women and their families. The process of structuring and sourcing the first of what we hope will be many similar funds was conducted in-house by our finance and legal teams, with some assistance from outside counsel and took less than two years from start to finish. The fund aggregates reasonably priced capital as a single source—as opposed to us brokering multiple agreements with many counterparties. This eases our administrative burdens and costs substantially, which is key as we strive to run an efficient operation. Additionally, the Social Business Fund has significantly expanded our points of contact in the impact investment world by introducing our organization and the work we do to new audiences.

The impact investing industry is already a $114 billion sector, with 40 percent of funds originating in the U.S. and 58 percent from the for-profit asset management world. We wanted to allow our existing investors and donors, and prospective ones, to directly invest in our microloan portfolio—to have an immediate impact on women’s lives.

Grameen America focuses on women because in the United States they are 38 percent more likely to live in poverty than men, and they receive only 4 percent of formal lending dollars. Women are more likely to be excluded from the financial mainstream and are less likely to have a credit score or a bank account. This makes it nearly impossible for low-income women to access capital and other services they need to generate income. By investing in women, we are investing in their families and communities; research proves that investing in women has a multiplier effect.

A growing body of evidence shows that closing the gender gap in the economy will actually lead to an increase in global GDP. Grameen America’s work and continued expansion—through the addition of new branches, more loan capital dispersed, and enhanced services for our members—contributes to this economic growth.

From the individual to the community to the world, the calls for a more just economic system are rising. The United Nations’ Sustainable Development Goals—a 15-year agenda—aim to achieve an inclusive economy. But a recent report revealed that 82 percent of the wealth generated globally in 2017 went to the richest 1 percent of the population, while the poorest 50 percent saw no wealth increase at all. And we know wealth disparity is rising right here in the United States, the richest country in the world. World leaders, impact investors, social entrepreneurs and philanthropists have realized the urgency of bringing financial inclusion to the forefront of the economic agenda, and are coming together to make this possible.

When I joined Grameen America four years ago, I was drawn to the organization’s mission of empowering low-income women in the United States to grow small businesses. I was eager to build on my own experience helping to solve social issues through market-based means. It’s true, there is no “silver bullet” to ending economic inequality, especially for poorer women, who are the most excluded from formal financial systems. But working together, we can find a way to narrow the gap. We are thankful that our supporters have committed to impact investing to expand our outreach and better serve thousands of low-income women across the country.

David Gough is senior vice president & chief financial officer at Grameen America.  

Images of women entrepreneurs supported by Grameen America, which provided the photos.