inclusive finance

SOCIAL ENTERPRISE AND MICROFINANCE – A POWERFUL PARTNERSHIP

by Miranda Barham, WAM UK Steering Committee

jesca-makumbi

WAM UK hosted a very interesting evening with special guest, President & CEO of FINCA, Rupert Scofield.  Rupert shared with us the journey he has been on since starting FINCA in 1984 to today’s challenges of finding social enterprises, running profitable microfinance institutions and running fundraising campaigns.

FINCA started on a quest to identify investible social enterprises to fund and partner and in doing so, discovered that they were already funding a number of these.   Examples of this include over 200 “charter schools” in Uganda, and a community health clinic in Lumbumbashi, Democratic Republic of the Congo.

Rupert explained, “I stumbled upon a charter school on the outskirts of Masaka, Uganda when I went to see some clients who had purchased solar lanterns from Brite Life.   “Do you want to see our school?”  one of the clients asked me.   “You have a school?”   It seemed unlikely; this was a remote community many miles from the nearest paved road.   They took me to meet a former teacher who had left the public school system and, with a series of Finca loans, built seven classrooms and hired other teachers to teach grades K through 6.”

By having the school right in the community, the students avoided the perilous 5 kilometer walk to the nearest public school where they could be preyed upon by pedophiles.   Finca was also financing the other side of the transaction, making loans for school fees to the parents of the children.

In Lumbumbashi, two physicians had left the public healthcare system and, with a series of Finca loans, build a small clinic and a 10-bed hospital.  They were treating the people of the community for the four most common illnesses in rural Africa and charging $2.50 per consultation.  If the patients were destitute, they provided treatment for free.

FINCA is passionate about social enterprise.  Rupert believes that the current trend of social enterprises moving into the vacuums left by a faltering, underfunded public sector services will continue, and eventually social enterprises, small, medium and large, will be the main vector for meeting the basic needs of people living at the bottom of the pyramid.   He explained that an added bonus will be that these social enterprises will collectively employ millions of currently un/underemployed young people, which is a huge and growing time bomb which, if not addressed, will destabilise all developing societies.

eucharia-nwanguma_nigeria

For those of you inspired to take up the social enterprise challenge, Rupert has some words of wisdom, “Find a disadvantaged/oppressed constituency, live amongst them, walk in their shoes until you feel their pain and figure out a way to be useful.”  He recommends working or volunteering for an organisation that works in this space and then with experience gained, striking out on your own.   He says that’s when the real adventure begins.

“If your idea is powerful enough, it will withstand the many mistakes you will make.   Remember that nothing works the first time, so be stubborn and persistent.   Stand up to the skeptics and keep plugging away.   You will find, also, that your passion for your mission will attract fellow travelers.   You also have to pick your head up every now and then and see who is imitating you and possibly doing it better than you are.   The life cycle of new technologies is getting shorter and shorter.   Picking the winners is going to make the difference between success and failure.” And After five decades in the space, Rupert should know.

If you would like to support FINCA’s latest campaign to raise £1 million in support of women taking their first teps in business, please donate here so that FINCA can help them generate the extra income they need to buy food, pay for healthcare, and put their children back into school.

In the last few months, faced with rising levels of conflict and migration, women have been forced to find new sources of income to support themselves and their children. With your help, FINCA can make a difference.

Advertisements

Dinner Debrief: Digital currency platform, Uphold, making global remittances more cost effective

by Miranda Barham, WAM UK Steering Committee Member

group uphold wam

WAM UK Dinner with Uphold on Digital Currency & Financial Inclusion

WAM was delighted to have Diana Biggs, VP of Uphold, the fastest growing money platform, speak at our latest dinner on how digital currencies can enable financial inclusion.

Today, more than 50 percent of the world’s adult population is denied access to affordable banking or basic financial services. Globally, 2.6 billion people are considered ‘unbanked’ or ‘unbankable’. The World Bank has identified cost and travel distances as two of the key reasons that 73% of the world’s poor remain unbanked: two factors that digital currencies can severely undermine.

Often the people who can least afford banking services are charged the most for them in the form of over-priced money transfer services, expensive currency exchanges, costly payment processors and risky cash couriers.

One of the major ways technology can enable financial inclusion is in making it cheaper and easier to send money quickly and safely. The World Bank’s data[1] shows that money sent home by migrants now represents one of the largest foreign income inflows to developing countries.  Eighty to 90 percent of remittance money is spent on basic necessities including food, clothing, shelter, healthcare etc.

Remittance funds are no small fry. Globally, remittance receipts (including both developing and high-income countries) were estimated at $563 billion in 2014 and are forecast to increase to $636 billion in 2017.  Typical remittance fees for sending $200 are around seven to eight percent.  Such fees are diverting money away from the recipients who need to keep as much of it as possible.

Uphold’s mission is to make it easier and cheaper for everyone to send, hold and receive money and allows its customers to do so only paying a small fee locally when the funds are withdrawn.  Users of Uphold’s platform, located in over 170 countries around the world, can upload funds through a variety of methods, including cash deposit, bank transfer, credit card and Bitcoin and send funds to other users regardless of their location instantly and for free. One of Uphold’s partners, LibertyX, allows access to bitcoin purchase and transfer using cash at 19,000+ plus stores across the US, many of which are convenience stores, and has become an increasingly popular tool for Latin American immigrants to store and send money abroad.

Users can also hold their funds on Uphold’s platform and swap it between currencies of their choice.  This allows users to protect themselves from fluctuating currencies and also have the option to store their funds in one of four precious metals.

The firm is actively working on partnerships to create more ways for people to access, send and hold money in more countries around the world.  It is also dedicated to keeping its pricing as low as possible, with the majority of services being free with the company instead charging small fees at the point of withdrawal of funds – it is after all intended to be a sustainable business model.

Diana notes that there is still much work to be done in working towards full financial inclusion via digital currency and platforms, such as access to connectivity and technology, educating customers on how to use the service and the technology that enables it, However electronic money transfer and digital currencies could be a powerful tool to enhance financial inclusion and much of its potential is yet to be explored. Moreover it can provide opportunities for those who live in unstable monetary regimes to manage their savings and payments by keeping their savings with Uphold in US$ for example or other more stable forms of value.

The point was made by some at the dinner, and agreed by Diana, that Uphold is not yet set up to reach the poorest who may even have issues with technological or even more basic literacy which will be a barrier to them accessing these services, unless through a grassroots partner that Uphold might work with. But we also concluded that the service fills an important gap in providing access to financial services to many who are unbanked or have limited access.

 

Group pic digital dinner

Event Attendee Group Photo  On the night, we discussed how decentralised blockchain currencies work, details of which are covered in a Q&A we did with Diana ahead of the event to bring us up to speed on this financial technology. It is clear that globally there is a lot of interest and momentum behind digital currencies and blockchain, however we do not often hear of strategies that grow financial inclusion or even consider it at all in their expansion plans. Diana gave us an interesting perspective as to how a disruptive, high growth technology could consider and be used to expand the global reach of financial services for all – including the unbanked and hard to reach – and therefore not exacerbate financial exclusion through a digital divide.

 

[1]World Bank press release October 22, 2015 http://www.worldbank.org/en/news/press-release/2015/10/22/world-bank-forecasts-a-slowdown-in-migrant-remittances-in-2015

 

Q&A With Thea Anderson, Director of Financial Inclusion at Mercy Corps

nepal-201305-sshakya-0055.JPG

Two women transacting payments over their phones in Kathmandu, Nepal Source: Mercy Corps

WAM UK hosted a dinner with Thea Anderson, Mercy Corps’ Director for Financial Inclusion, with our members to learn more about the global organisation’s engagement in advancing access to financial services for women. Mercy Corps operates in 42 countries and is a leader in integrating mobile technology in financial inclusion. On the night, Thea shared her experiences working directly in designing and implementing solutions on the ground for Mercy Crops, and for the benefit for those who couldn’t join us, we asked her some questions here:

Thank you Thea for sharing your experiences with WAM, but first things first, could you introduce us to Mercy Corps?

Mercy Corps is an international non-governmental, non-profit agency impacting over 30 million people each year in the world’s most difficult places and emerging markets. We focus on solutions to systemic global poverty through humanitarian relief and long-term development. We recognize that new technology, business models and creative partnerships provide transformational opportunities to overcome poverty. Managing and providing technical assistance to over 40 country offices, with US and European Headquarters (based in Scotland) and a representative office in London U.K. Mercy Corps complies with the U.K. International Aid and Transparency Initiative and is rated each year by the U.S. Better Business Bureau and Charity Navigator – the premier American charity evaluator. Consistently, Mercy Corps receives the highest ratings. Mercy Corps ranked in the Top 10 in the 2013 Global Journal list of top 100 NGOs.

As Director of Financial Inclusion you’ve worked on expanding the reach of financial services in some of the world’s most fragile environments. Could you tell us more about Mercy’s Corp’s approach to financial inclusion?

Mercy Corps leads financial inclusion initiatives in over 30 countries partnering with commercial and public banks, MFIs, non-bank financial institutions, community-level financial institutions, and technology providers.  Even as a non-profit, we have launched commercial bank models in the Philippines, Mongolia and Indonesia, and most recently agent banking in Ethiopia which all use digital payments to serve millions of low-income clients without the need of a physical bank branches.

We recognize that traditional foreign aid hand-out programs will not lift and keep the billions of people at the bottom of the pyramid out of poverty. Mercy Corps therefore uses market-based approaches in partnership with commercial actors where feasible. We see technology as the key driver to lower transactions costs and payments as the entry point for other financial services allowing people to access money with the longer-term goal of establishing a place where they can safely save money, access capital and insurance products.

How does Mercy Corp use Technology to achieve financial inclusion, in particular with women?

Globally, Mercy Corps supports technology providers, financial institutions, and mobile network operators (MNOs) to identify and expand access to financial services at scale through the use of mobile and cashless technologies. This includes digital financial services and e-commerce platforms, agent networks, and bundled technology solutions such as the examples below:

  • In Nepal, Mercy Corps works with over 260 community-level financial institutions to access wholesale capital as well as introduce new savings, affordable credit, and remittances. This includes scaling several mobile payment platforms to rural Nepal in partnership with banks and Nepal’s largest branchless banking provider to reach thousands of new clients.

  • In Indonesia, Zimbabwe, and Uganda, Mercy Corps bundles financial services and farm- and crop-management tools for 170,000 small-holder farmers on affordable, unified mobile phone platforms. Farmers move along a four-step process using access to digital information and payments solutions as an entry point. Through these digital transactions, farmers build a transaction history to develop credit scores that enables them to engage with more formal financial services, including remittances, savings, credit, and insurance.

  • Mercy Corps hosted Tunisia’s first ‘Innovation Challenge for Financial Inclusion’ with financial institutions, crowd- sourcing platforms and angel investors for new mobile financial products for the growing Tunisian market. As a result, Mercy Corps is co-financing new crowdfunding platforms targeting youth entrepreneurs. In 2015, the Tunisian Post Office, which has over 1,000 branches and millions of clients, will launch a micro-savings product via mobile phones and electronic cards across the country with support from Mercy Corps.

Is Technology an effective enabler for financial services? If so, how can we ensure that women are not left out of the digital revolution?

Digital technology can change lives. It provides access to critical information for women. Female farmers can learn to weather costs of agricultural inputs, be linked to financial services such as payments, remittances, and savings, and connect to social media and e-commerce platforms. However, to benefit from technology you must have access to technology. Globally, over a billion women do not have full access to a mobile phone or access to digital financial services even in its most basic form.[1] This is especially acute in South Asia. Recent data shows than more that up to 50% of women in Niger, the Democratic Republic of Congo, and Indonesia have never used a mobile phone, even for voice calls.[2]

As the world moves forward towards digital, huge numbers of the population are being left behind. Not only is this a missed opportunity for women on the customer-side this is a huge lost for the commercial sector – up to an estimated £111 billion for MNOs alone over the next five years.

Mercy Corps has a major role to play – to connect different segments of women to technology providers, financial institutions, and MNOs to expand their access to and usage of digital financial services. International agencies like Mercy Corps offer valuable insights about potential client demand to governments, multinational corporations and technology firms that don’t have first-hand knowledge of field realities and needs. Development actors like Mercy Corps play a critical partnership role by mitigating risks for other actors, especially in complex and fragile states.

Looking ahead, what are the key priorities for Mercy Corps’ in financial inclusion?

Mercy Corps will continue to prioritize countries in transition from war or natural disaster or in the midst of economic or social transformation. For us, ‘business as usual’ means partnerships with governments and the private sector to solve complex global challenges of both emerging and pre-emerging economies, including financial inclusion.

Please find more on Mercy Corps current work in financial inclusion here.

[1] http://www.gsma.com

[2] Ibid.

7 Things I Learnt at the Global Social Business Summit 2015, Berlin

By Sophia Velissaratou, co-founder WAM UK

GBS

Source: Global Social Business Summit 

Social business is a relatively new concept introduced by Nobel Peace Prize winner, Professor Muhammad Yunus, which he describes in detail in Building Social Business. Simply put, Yunus describes two types of social businesses:

Type I: a non-loss, non-dividend company devoted to solving a social problem (concerning education, health, environment, access to technology etc) and owned by investors who re-invest all profits in expanding and improving the business.

Type II: a profit making company, owned by poor people, either directly or through a trust that is dedicated to a pre-defined social cause.

Professor Yunus distinguishes Social Business from other concepts such as Corporate Social Responsibility (CSR), social enterprise and entrepreneurship; seeing CSR as charity (CSR) and social entrepreneurship as profitable outfit for investors. Since its first inception the Social Business movement had gained momentum amongst many, ranging from businesses to NGOs to academia.

On the 6th and 7th of November, I attended the 7th Global Social Business Summit in Berlin and as the co-founder of WAM UK, I would like to share a few things I learnt with the wider WAM community:

  1. The Social Business movement is here. To stay: During the summit I came to realise that there are many social business initiatives and they take many forms. Take for example Grameen Danone who set up a small unit in Bangladesh to produce nutrition fortified yoghurt for low income families. Or McCain industries who have a program helping Greek farmers in the Northern village, Notia. Not to mention numerous university programmes worldwide focussed on the research and promotion of social business, for example The Grameen Creative Lab and Yunus Social Business, both of which have ample information to share.
  1. It’s not about the star, it is about the purpose: This year’s summit was marked by Prof. Yunus’ absence. A minor health issue prevented him from travelling to Berlin to be there in person but he addressed the participants with a video message. Undoubtedly any event Yunus attends attracts notable crowds and WAM UK experienced that first hand when we organised an event with him back in 2011. Yunus is often lovingly described as a rock star in his own right within the sector, which despite its obvious benefits can also be a drawback, since his absence could have led to disappointment and deflation. However, that was definitely not the case. Organisers and participants alike worked, presented and interacted with incredible drive and on top of it all – we had fun!
  1. Some CEOs get it. Big multinationals like Danone, Veolia, McCain and others talk and think seriously from a business perspective on how to solve social problems. They are not just interested in ticking CSR boxes or having a good PR profile. They are showing commitment to this type of business. They understand that failure is part of the process and not all social business ideas will work but they allocate time, resource and energy just like any other business unit they are running. They showed us that they won’t stop until their social businesses become sustainable and poor or unprivileged people have profited from it.
  1. There is such a thing as ‘good’ business, it’s called social business: During my years in finance I was always wondering why profit and growth usually come at the expense of values such as partnership, compassion or empathy. Can you not have a serious business proposition by combining all these aspects? The summit made me realise that social business is a legitimate answer to this question. Yes, you can have a business which is both profitable and solves a social problem. Yes, you can generate profit and re-invest it in the business to create more jobs; ameliorate conditions for poor people – to change the world.
  1. Partnerships are a must: Listening to the panel discussion during the conference I was impressed to see the degree to which partnerships are important for the success of social business. Words like competition, confidentiality, possession were not part of the social business vocabulary. Instead words like transparency, exchange of ideas, collaboration, resilience, joy and facilitation are the language of social business. This was evident in focus groups where there was a genuine exchange of ideas. The workshop organisers were not interested in telling their stories but in hearing our ideas on how we would approach a social business idea differently or find a better solution than the ones they thought of.
  1. Youth is the future: Yunus’ decision to focus on youth and academia shows he is a visionary. Social business is a relatively new concept that taps on ideas such as non-dividend business, compassion and teamwork etc. These and similar ideas are not commonly found in the conventional business world, and that’s likely because today’s professionals were not educated to think otherwise. Educating people on the concept of social business from an early age is key. Because these young students will be tomorrow’s academics, investors and entrepreneurs who will strive for a better world. On top of that, youth are very creative and driven – and experience suggests they don’t give up easily. Moreover, today’s youth are raised amongst increasingly advanced technology, a leading force in social business.
  1. Location, location, organisation: Last but not least I would like to mention the organisation of the conference. First I was impressed by the venue: Hangar 7 at Tempelhof airport was for me the perfect location for such a conference. The set-up of the venue facilitated the smooth transition from the panel discussions to the meeting area where participants could meet, grab a coffee and roam around the various stands promoting social business. The organising team practiced what they preached: from the conference bags, the conference furniture, the catering, the products, everything had a social business story to tell. Every single moment you were surrounded by inspiring examples. Hans Reitz (Head of GSBS and Founder of the Grameen Creative Lab) and his team created a fantastic environment for participants and they deserve compliments all round.

In short, I can’t wait for next year’s summit.

Find pictures of the Summit on GSBS website newsroom , GCL Facebook page, and a new video on YouTube.

Microfinance and Women’s Empowerment: is it really helping them?

by Kim Croucher, WAM UK Steering Committee

Source: US AID, Flikr Creative Commons

Source: US AID, Flickr Creative Commons

It’s a question that has occurred to many of us who work in women’s financial inclusion and  increasingly  pertinent as the industry has developed and changed; whilst data and research has oftentimes been disappointing in providing a clear link, we ask, is microfinance – as a tool to empower women – really working?

In June, Ernst & Young hosted WAM and the Microfinance Club UK to debate this hot topic – aided by three highly qualified speakers on the subject:

  • Mary Ellen Iskenderian, President and CEO of Women’s World Banking, the global nonprofit devoted to giving more low-income women access to the financial tools and resources they require to achieve security and prosperity.
  • Sevi Simavi, Chief Executive Officer of the Cherie Blair Foundation for Women,a charitable foundation that develops programmes to provide women with the skills, technology, networks and access to capital that they need to become successful small business owners.
  • Justina Alders-Sheya, Senior Manager, EY, specializing in Financial Inclusion & Microfinance and Wealth & Asset Management.

Justina showcased the work that EY has been doing to investigate this topic, to offer better advice to its clients in this space (microfinance institutions and investors).  According to her, there are various broad themes that may help the microfinance industry to understand its impact on women better, but more importantly may help the industry serve women more effectively.

The first is technology, which has the potential to boost financial inclusion for women in a way that was not possible before.  Some of the basic barriers that used to exist for poor women to access finance – safety of carrying cash in public, the ability to travel long distances to reach a bank branch, confidence to walk into a bank and speak to a male member of staff – all this is blown away with mobile banking. Of the 2 billion unbanked individuals in the world today, 1 billion have mobile phones and mobile accounts are now available in 61% of developing markets.  The potential to reach the previously unreachable is huge.

Mainstream financial institutions are entering the space faster than ever and this could enable microfinance to further extend its reach. With this entry may also come increasing regulation, which could mean better customer protection and potentially harmonizing standards across countries and regions.

Impact measurement has been a focus for years, but is still key to understanding whether microfinance is helping women.  Measuring the impact of having access to finance is important, but the answers rely on long-term research. Leading on from this is a topic that is relatively new – but receiving a lot of attention – and that is looking at behavioural insights when lending.

The understanding of psychological, social and cultural influences on decision making and behaviour can really help providers in delivering a service that leads to the best outcomes. But the very reason why it is attracting attention, might lead to the mainstreaming of microfinance – since behavioural insights would make it easier for commercial financial institutions to know how they can offer services to this segment of the market and still make a profit.

Sevi Simavi presented how the Cherie Blair Foundation realized very quickly when they set-up that access to capital was key to empowering female entrepreneurs. When the organisation first started, a lot of women they worked with still kept their cash under the mattress.  Having a bank account is critical from an empowerment perspective, without this, a woman rarely has control over her money – the cash ends up going to husbands or fathers.

In a recent report by the World Bank on Financial Inclusion, it quotes findings that the number of unbanked individuals has fallen by 20% between 2011 and 2014 (that amounts to 62% of adults who have a bank account vs. 51% in 2011) – which reveals some improvement in access to banking services.  However, there continues to be a gender gap in account ownership – the gap varied depending on the region, but overall only 58% of women worldwide are banked vs. 65% of men.

So while there may not yet be the hard evidence to point to the empowerment effect that microfinance is having on women around the world – there is most certainly a need for increasing financial services made available and accessible to women.  But to benefit from these services, Sevi made the interesting point that female entrepreneurs also needed to be given knowledge and capabilities (the ability to manage an account, to know the difference between profit and loss, basic book-keeping skills). Financial literacy training is therefore key.  Here technology can also have a part to play – delivery of training through a mobile phone can be fast, efficient and can reach those who were previously unreachable.

Our main takeaway from Mary Ellen’s speech was the idea that to serve the poor most efficiently, one has to address women,  and this means thinking about the services that women need, because they will be different to men’s.

Empowering women is crucial to serving the poor and developing economies, because women make up a far larger proportion of the poor, because a woman is far more likely to make investments back into her community and her children if she earns money – and one aspect of empowerment is through financial inclusion, so that women are increasingly in control of their money and their own decision making and futures.  Yet women are facing greater financial exclusion in every geography and across every income level.

The key to Mary Ellen’s message was that in order to support women’s empowerment – we need to make financial services better tailored to women.  Her point was that it was becoming clear that women wanted different things to men when it came to financial services.

For example, women want convenience, they greatly value confidentiality, they want more security, they want to trust the organization they are dealing with. Technology can go some way towards addressing these needs – but building trust may mean offering a lot more information to potential female customers because that is what they require to make a decision, it may mean explaining things in a more transparent way and it may mean having female agents.

In Tanzania for example, women are opening bank accounts at the same rate as men, but the main feedback from women there is that it is too easy to spend the money in the accounts – instead they would like restrictions on withdrawing money and incentives to save towards a goal – again a different way of thinking and different needs.

Mary Ellen was also optimistic about digital banking due to the convenience it offers women, the new markets it represents for banks and customer stickiness it offers the mobile operators – many reasons why she thinks digital banking may be a game-changer for financial inclusion.

Given all the talk over the evening about the coming revolution of digital/mobile banking, a question from the audience was put to the panel on whether mobile phones would destroy the support dynamic that can come from more traditional group savings and loan arrangements.  The panel felt there was a way to use mobile phones in microfinance (distributing loans, repayments) that would work either on an individual or group level – so it did not necessarily threaten the group model.  But they added that eventually individuals, especially entrepreneurs, needed loans that were specific to their own needs and so having this ability to tailor a product to individuals is advantageous to all involved.

If the conclusion the room was coming to during the evening was that financial inclusion is really key to women’s economic empowerment – even if the evidence isn’t there to directly link this progression yet – why then is there still a gap?  What about discrimination in this space – did the panel think that this was a more serious hurdle than the microfinance community are currently expressing and does the language around discrimination need to be ramped up in order to change the attitude of providers?  The panel felt there certainly is discrimination – but not always on the part of the players in the industry – it is a wider issue involving governments and communities. The fact that women can’t open a bank account in many countries, or face significantly more hurdles than men do when trying.  In Bangladesh, women need a birth certificate to open a bank account, but many poor women weren’t registered at birth – ID issues are a huge challenge for the poor.  Ownership of property that can act as collateral is another common problem for women, which also makes it more difficult to access capital.

Summing up – do all these developments mean that microfinance can help increase gender equality?  The panel were optimistic.  Sevi put it so well when she said that for all those who work tirelessly in this space and who care about women’s empowerment – it should be about progress and not perfection.

On Principles for Responsible Investment

Q &A with UN-supported Principles for Responsible Investment

In conversation with Emilie Goodall, Head of Environmental and Social Themed Investment, UN-supported Principles for Responsible Investment (PRI)

UN-PRI

sig_growth PRI

Growth in PRI signatories and related AUM. Source: PRI

Thanks for speaking to us Emilie, but first things first, we hear the term a lot, but what does “Responsible Investment” mean?

Thanks for the opportunity and the questions! Responsible investment is an approach to investment that explicitly acknowledges the relevance to the investor of environmental, social and governance (ESG) factors. Responsible investors recognise that the generation of long-term sustainable returns is dependent on stable, well-functioning and well governed social, environmental and economic systems. We have a handy two page summary for those who want to know more.

That sounds great – so what is the PRI and how does it work?

The PRI Initiative is an international network of investors working together to put the six Principles for Responsible Investment (PRI) into practice. The goal is to understand the implications of sustainability for investors and support signatories to incorporate these issues into their investment decision making and ownership practices. There are now nearly 1200 asset owners, investment managers and service providers signed up from around the world, managing over US$ 30 trillion. The PRI Initiative helps investors to learn about and collaborate on the financial and investment implications of environmental, social and corporate governance issues.

Could you give us an example of how the PRI has led to more responsible investment?

Let me give you a couple! In terms of tackling specific problems in the investment chain, the PRI runs a collaborative engagement platform called the Clearinghouse. It provides signatories with a private forum where they can pool resources and share information when engaging with companies and policy makers on ESG issues. Collaboration carries extra weight and can be less resource intensive than if investors engaged alone. One recent engagement brought together 21 investors concerned with poor public disclosure of anti-corruption risk management among 21 companies. After three years of engagement, sixteen companies have improved their performance against a set of indicators provided by Transparency International, with ten companies improving their score by four-fold and the leading company improving its score by six-fold.

Looking at impact from a more systemic level, the PRI is accompanied by a reporting framework which all signatories are required to complete (and publish) annually, in a bid to increase transparency and accountability. The PRI assesses individual signatories’ results and benchmarks performance against that of their peers, to aid learning. In 2011, PRI analysed the results of the reporting framework over the past five years to see what had changed – see PRI’s Report on Progress.

To pick out just a couple of examples, having a responsible investment policy (one of the first steps for responsible investors) had become a norm among PRI signatories. Two thirds of investment managers had such a policy in 2007, and in 2011 it was up to 94%. Integration of ESG factors into investment criteria was up to US$ 10.7trillion from US$ 3.6trillion in 2009. Clearly, there’s still some way to go, but this presents a good start! Attribution is always difficult, but in a recent survey conducted by MSCI ESG Research, survey participants identified the top driver for ESG adoption as the PRI (25%), closely followed by asset owners (24%), NGOs (15%) and corporate institutions (11%).

The focus of the PRI seems to be around the signatories, how do investees and say, the general public, benefit?

Although the Principles are designed to enhance the delivery of long-term returns to clients and beneficiaries, their implementation puts greater attention on ESG issues throughout the investment chain. The theory of change is that corporate management will take more interest in these additional drivers of risk and reward if encouraged by investors to adopt a more systematic approach to managing ESG issues, and that these drivers will come to define corporate profitability in the medium and longer term. In this way, the Principles for Responsible Investment should contribute to improved corporate performance on environmental, social and governance issues, better aligning investors with the broader objectives of society.

You recently launched a report on another set of principles – the PIIF (Principles for Investors in Inclusive Finance), what’s that?

The PIIF, housed within the PRI Initiative, were launched in 2011 by a small group of investors. These seven Principles are designed for investors providing finance, either direct or indirect, to retail institutions (e.g. companies, banks or microfinance institutions) that provides financial services (credit, savings, insurance, mortgages, remittances, payments) to clients who have traditionally been excluded from such services. These could be consumers, microenterprises or SMEs, in emerging or developed markets. As of June 2013, 51 investors had signed the PIIF, between them managing two thirds of the estimated US$14 bn of foreign capital investment in inclusive finance.

As with the PRI, the PIIF is accompanied by a reporting framework. This was piloted for the first time last year. The summary results are available in the PIIF Signatories’ Report on Progress, which enables investors to see the progress being made, by indicating examples of emerging good practice as well as areas for improvement.

It’s been two years since PIIF was launched – what has been learnt so far?

The PIIF brings together a wide range of investors, from non-profits to boutique investment managers to corporate pension funds. Interpretation and implementation of the Principles therefore varies, so a number of investors have helpfully shared case studies and action plans with one another. In some areas of the Principles, like ‘balanced returns’, we are still in the process of defining what this means. In October we’ll be holding a joint roundtable with the Council for Microfinance Equity Funds (CMEF) in London on this topic.

In your view then, what are the key trends to look out for in responsible inclusive finance?

There is a push for financial inclusion to be included in some form in the post-Millennium Development Goals, so I anticipate continuing scrutiny of the role financial inclusion can play in delivering development objectives. That will likely require a greater commitment to not just social performance measurement but also outcomes measurement, in SME finance as well as in microfinance. Not all investors see it as their role to capture such information; greater disclosure will bring the additional benefit of making these differing approaches more visible.

About Emilie

E Goodall

Emilie Goodall joined PRI in July 2011 as Project Manager for the Principles for Investors in Inclusive Finance (PIIF). She became Head of Environmental and Social Themed Investing at the PRI in 2012, and is currently PRI’s Acting Head of Implementation Support. Previously, she was Senior Investment Manager at CAF Venturesome, a social investment fund. There she managed debt and equity-like investments in nonprofits, and was engaged in research and policy work promoting the growth of the UK impact investing market. She holds an MA in Philosophy and French from the University of Oxford and qualifications in Financial Management and Development Management.