MICROFINANCE PAPER ROUND-UP: Index of Women Entrepreneurs; Investing in Affordable Housing; Comparing Impact, Traditional Investment Returns

“Mastercard Index of Women Entrepreneurs 2017,” published by Mastercard, March 2017, 31 pages, available at https://newsroom.mastercard.com/eu/files/2017/03/Report-Mastercard-Index-of-Women-Entrepreneurs-2017-Mar-3.pdf

This tool is intended to measure the evolution of women’s participation in business around the world. The authors apply a set of 37 indicators to data from 54 economies to explore the variations in: (1) women’s advancement; (2) knowledge assets and financial access; and (3) supporting entrepreneurial conditions. One of the primary women’s-advancement indicators is the percentage of CEOs and managers that are women in a given country. Six of the top 10 performers are upper-middle-income countries, with Canada and New Zealand being the only high-income countries in the top 10. Regarding knowledge assets and financial access, the authors deem most countries in all regions to have high scores, with the exception of Africa and the Middle East. In terms of supporting entrepreneurial conditions, the authors find a strong correlation with income. That is, high-income countries scored the best in creating healthy environments for business ownership by women. The document also includes case studies specific to several countries.

“State of Investment in Affordable Housing,” by Patrick Elmer, published by Habitat for Humanity, November 2017, 24 pages, available at http://www.microfinancegateway.org/sites/default/files/publication_files/state_of_investment_in_affordable_housing_report-published-11152017.pdf

This paper reviews investors’ activity, motivations, opportunities and risks in “emerging and frontier market” affordable housing. Of the 28 investors covered, a vast majority are asset managers, banking institutions or wealth advisors based in Europe. Most are exposed to affordable housing through private debt (65 percent) and private equity (56 percent). As for geographical distribution, 78 percent of investors are active in Africa and the Middle East, 61 percent have placements in Latin America and South Asia, and 35 percent invest in the rest of Eurasia. Regarding types of investees, 35 percent of those surveyed invest primarily in companies that provide building materials – the supply side – and 35 percent invest in financial institutions funding construction projects – the demand side. The remainder invest in both of these.

Regarding motivation, all of the investors cite social impact, 44 percent cite financial return and 44 percent cite diversification. Their major risks include a shortage of investment opportunities, the need for highly specialized local expertise for real estate investments, and macroscopic changes such as political or economic instability.

In terms of returns, 57 percent of investors say their affordable housing ventures have met their expectations. However, there is a divergence between the supply and demand sides. While the demand side generally has yielded the expected rates of return, investments in building materials suppliers generally have not.

“GIIN Perspectives: Evidence on the Financial Performance of Impact Investments,” by Abhilash Mudaliar and Rachel Brass, published by the Global Impact Investing Network (GIIN), November 2017, 36 pages, available at https://thegiin.org/assets/2017_GIIN_FinancialPerformanceImpactInvestments_Web.pdf

The authors of this paper compare data on the financial performance of private equity, private debt and real assets in the impact investing and traditional investment arenas. For private equity, they find impact investing returns to be comparable to traditional market returns. Likewise, the variability of private-equity impact-investing returns was deemed within the norms of traditional private equity. However, certain aspects of impact investing did differ, such as the general rule of larger funds outperforming smaller ones not being borne out. Another difference is the significant divergence of target and real returns. While impact investors expected annual returns on the order of 15 percent, they earned about half that.

For private debt, the largest class in impact investing, the average returns of fixed-income investments are within the “vintage debt investments” range of 2.7 percent to 9.2 percent. Similarly, for real assets such as timber, infrastructure and real estate, the authors find internal rates of return to resemble those for conventional markets.

By Patrick Hirtle-Lewis, Operations Associate

Sources and additional resources

Global Impact Investing Network
https://thegiin.org/

Mastercard
http://www.mastercard.com/

Habitat for Humanity
https://www.habitat.org/

Terwilliger Institute for Innovation in Shelter
https://www.habitat.org/impact/our-work/terwilliger-center-innovation-in-shelter

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