can helping someone make you richer?

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Can helping someone make you richer?

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An exploration on the profitability of microfinance and other social finance schemes.

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Page 1: Can helping someone make you richer?

Can helping someone make

you richer?

Page 2: Can helping someone make you richer?

Can Philanthropy Be Profitable?

An analysis of Microfinance & Social Impact Bonds

Financial Instruments, Institutions & Markets Dr. Chan Soon Huat G9 Group 3 Gail Chia Yue Ling Hilary Chan Hui-Ling Laura Garcia Wang Malay Girish Gala Vu Thi Luong

Page 3: Can helping someone make you richer?

Agenda

•  Introduction •  Microfinance

–  What is it? –  Application in Singapore –  Future directions

•  Social Impact bonds –  What are they? –  Application in Singapore –  Future directions

•  Conclusion

Page 4: Can helping someone make you richer?

The provision of private resources for social purposes, either in the form of grants or of

‘social’ or ‘impact’ investment - generating financial as well as social return.

Philanthropy is

“”

Page 5: Can helping someone make you richer?

Microfinance Social Impact

Bonds

BoP Investment

Social Entrepreneurship

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Microfinance Social Impact

Bonds

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Microfinance

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Microsavings Microcredit Microinsurance

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Microcredit

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$967 million

Outstanding Loans in US Dollars

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8.37 million

The number of borrowers in the year 2012

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96.67%

The recovery rate of funds loaned out

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94%

The percentage of clients who are women

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No collateral required

Group lending & monitoring

Variety of intermediate interest rates

Facilitates escape from poverty cycle

4 Key Features

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Facilitates escape from poverty cycle

4 Key Features

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No collateral required

4 Key Features

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Group lending & monitoring

•  Alternative lending structure

•  Social pressures

4 Key Features

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•  Traditional Banks<MFI<Loan Sharks

•  20%, 8%, 5%, 0%

Variety of intermediate interest rates

4 Key Features

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Page 21: Can helping someone make you richer?

Outreach to the rural community Increase in savings, members, loans and deposits

Number of houses built Profits in 26/29 years in operation

No donations since 1995

 •  Profits  in  26  of  29  years  in  opera2on  

•   No  dona2ons  since  1995  

     

Benefits

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Lack of Transparency Loan Renewal and Debt Cycle

Threat of Government Takeover

Criticisms

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Financial Access to “Un-bankables”

Long Term Sustainability

In Summary

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Application in Singapore

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Lending  • Availability  of  funds    

• Online  lending  pla@orms  

Engaging  

• Microfinance  Society  of  

Singapore,  Banking  with  

the  Poor  Network  

• Microfinance  

Informa2on  Exchange  

Consul/ng  

• Consul2ng  services  :  Unitus  Capital,    Caspian,  

Philips  Capital  

• Retail  Microfinance  by  

Milaap  Singapore  

Singapore: The Asian Headquarters

for MF initiatives…?

Developing countries

Lending

Engaging

Consulting

•  The need is greater

•  Economies of scales

Page 26: Can helping someone make you richer?

Singapore: The Asian Headquarters

for MF initiatives…?

Lending

•  Availability of funds •  Online lending

platforms

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•  Microfinance Society of Singapore, Banking with the Poor network

•  Microfinance

Information Exchange Singapore:

The Asian Headquarters for MF initiatives…?

Engaging

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Singapore: The Asian Headquarters

for MF initiatives…? Consulting

•  Consulting Services: Unitus Capital, Caspian, Philips Capital

•  Retail Microfinance

by Milaap Singapore

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•  The  marginalised  

•  The  micro-­‐entrepreneurs  

•  Helping  ini2a2ves  •  Micro  Credit  Business  Scheme  

•  Other  proposals  •  Unrecorded  help  by  social  network  

 

The

Mar

gina

lized

•  Single Parents •  Ex-offenders •  Youth-at-Risk •  Elderly

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•  The  marginalised  

•  The  micro-­‐entrepreneurs  

•  Helping  ini2a2ves  •  Micro  Credit  Business  Scheme  

•  Other  proposals  •  Unrecorded  help  by  social  network  

 

The

Mar

gina

lized

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Give a man a fish, and you feed him for a day.

Teach a man how to fish,

and you feed him for a lifetime.

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Micro-Entrepreneurship

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Micro-Entrepreneurship

Micro Credit Business Scheme

Proposals in the Pipeline

Undocumented help by social network

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• MF  benefits  the  entrepreneurial  poor.    • Pro  and  an2    condi2ons  weigh2ng    • MFIs  may  not  be  sustainable  and  profitable  .  

• Going  forward  

Feasibility in Singapore

Availability of Funds

Efficient supporting regulation

No economies of scale

Lack of strong social support network

Lack of motivation

High risk of failure in

running a micro business

Pros Cons

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Rich Country, Poor People

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$15,000,000,000,000

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Problem

Intervention

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Problem

Intervention

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Effective Prevention Programmes Have No Resources

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Scale Proven, Preventive

Interventions

Improve Impact of Government

Spending

How to:  

?  

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Social �Impact Bonds

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Stakeholders

•  The  investor  of  capital  

•  The  operator  of  the  project  

•  The  payer  

The Investor The Operator The Payer

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FUNDING

RISKS

RES

ULT

S

FUN

DIN

G

PROJECTS

The Investor

The Operator

The Payer

The Prospect

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FUNDING

RISKS

RES

ULT

S

FUN

DIN

G

PROJECTS

The Investor

The Operator

The Payer

The Prospect

RETURN

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An estimated 60% of short-term prisoners reoffended within one year of release

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An estimated 60% of short-term prisoners reoffended within one year of release

Target: 3,000 Short-Term Prisoners Aim: To reduce reoffending to 7.5% Estimated Savings: £10 for every £1

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Stakeholders

•  The  investor  of  capital  

•  The  operator  of  the  project  

•  The  payer   The Investor The Operator The Payer

Philanthropic Foundations

HNW

Individuals

Social Finance

Other

Partners

UK Government

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Outcome-based incentives drive efficiency

Spur innovation

Measuring impact

Displacing existing solutions

Benefits Challenges

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Application in Singapore

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Obesity

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2004 2010

6.9% 10.8%

Obesity Rates

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•  Healthcare:  Obesity  •  Reduce  obesity  rates  •  Lower  government  expenditure  on  healthcare  

•  Partner  organiza2ons:  HPB,  CDCs,  MOE,  MOM  

Aim

Partners

Projects

To reduce obesity rates

HPB, CDCs, MOE, MOM

Counseling & events

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Youth-at-Risk

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Aim

Partners

Projects

To reduce number of youth-at-risk & reoffending rate

MSF, investors

Vocational Training & Workshops

•  Youth-­‐At-­‐Risk  •  Reduce  number  of  youth-­‐at-­‐risk  and  recidivism  rate  

•  Financial  burden  shared  by  MSF  and  investors  

•  Improve  employability  of    these  youth  

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Australia

United States of America

Europe

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United States of America

Reduce reoffending rates amongst youth Early childhood education

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Portfolio Diversification Government funds channeled to other areas

Brings market discipline to the sector

Benefits

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Financial Risks Execution Risks

Risks

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Conclusion Social investment CAN be profitable

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Social Financial

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Q & A