In September, I had the opportunity to participate in a dialogue with more than 45 other participants as part of a roundtable hosted by ACCION’s Center for Financial Inclusion. The purpose of this new blog is to continue the conversation we started that day – and I am honored to be the first to post here.
At Calvert Foundation, we often talk about impact investing as a virtuous circle, one that creates empowerment, opportunity, and engagement by connecting investors, underprivileged individuals, and communities. This connection – to me – is the ultimate goal of financial inclusion. It’s about a connected circle of people, with mutual benefit for all the stakeholders involved, and with clients at the center.
So how do we make finance more inclusive?
First, we have to build out the community of those dedicated to financial inclusion by expanding the types of partnerships we pursue. Strategic partnerships are difficult due to competing interests. Key information can be proprietary, and goals don’t always align. In general, the financial inclusion industry needs to continue to build that capacity.
I am proud of the collaboration we at Calvert Foundation (through our subsidiary, Community Investment Partners) established with Citibank to get more dollars to communities where jobs and investments are needed most. In less than two years, this cooperation increased our lending activities by more than 50 percent. Partnerships are critical. At an industry level, therefore, we need to think about what partnership models will look like in the future, moving partnerships beyond the typical investor/service provider relationship. We need to do more – and we can’t do it alone.
Second, we also need to constantly look ahead. The needs of microfinance institutions and their clients are evolving and changing every day. New technologies bring new opportunities, but are also disruptive. The microfinance community can continue to provide niche services, or it can explore new products and new business models that will take it out of its comfort zone. Throughout, there will continue to be a need for patient, flexible, and affordable capital – but this is just one building block, and the delivery mechanisms are changing.
Finally, we must work to protect clients and continue to evaluate social impact. In 2009 Calvert Foundation began working with CGAP and ACCION to provide an investor perspective at the beginning stages of the Client Protection Principles now called the Smart Campaign. We were proud to become one of the first signatories, and have since worked to incorporate the principles into our investment process from beginning to end. We began using social impact covenants in our loan agreements, requiring MFI borrowers to comply with the Smart Campaign, or have their own code of ethics with equivalent emphasis on client protection. We have expanded the social impact section of our due diligence reports to include evaluation of the potential MFI borrower’s compliance with the principles. As of Q3 2011, 77 percent of Calvert Foundation’s MFI borrowers had signed on to the Smart Campaign. We hope by the end of 2012 that number will be 100 percent.
This last point about client protection and social impact is fundamental. When I was at the TBLI Conference in London earlier this month, I saw “Occupy” protesters just a block from where the conference was being held. They were camped out in tents near St. Paul’s Cathedral, waving signs that expressed frustration about a system they felt had harmed more than helped them. Financial inclusion is about bringing everyone into the system – but also about ensuring that that system is beneficial for those who participate.
Follow Lisa Hall on Twitter: @LisaGreenHall.