Microfinance and Social Impact Investment: affecting positive change
Microfinance is a proven and effective tool to empower marginalized populations through the provision of small loans and other financial services. More than 60 percent of people in the developing world do not have access to formal job opportunities; microfinance enables the poor to generate income through self-employment.
In 1997, Deutsche Bank became the first commercial bank to establish a fund to support the microfinance sector. The Bank provides loans to microfinance institutions (MFIs) worldwide and has served over 130 MFIs in 50 developing countries, benefitting as many as 3.8 million micro-borrowers. Over the last decade, Deutsche Bank has been a constant advocate in emphasizing microfinance’s essential social objectives. The Bank has used its leadership position to establish ethical principles for the industry and recently launched a fund dedicated to MFIs that pursue customer service excellence.
Due to Deutsche Bank’s investments, MFI clients in underserved areas have been able to finance and build small businesses that range from raising livestock to creating and selling traditional handicrafts. Through its work in the microfinance sector, Deutsche Bank continues to pioneer socially responsible and sustainable methods towards poverty alleviation.
Deutsche Bank was one of the architects of the Smart Campaign, which aims to embed client protection practices within the microfinance industry. These are the principles institutions must follow:
- Appropriate product design and delivery
- Prevention of over-indebtedness
- Responsible pricing
- Fair and respectful treatment of clients
- Privacy of client data
- Mechanism for complaint resolution
Social Impact Investment
It is increasingly acknowledged that governments and charities alone cannot solve global challenges. The nascent social enterprise and impact investment sectors hold great promise in enabling private capital to be used towards addressing broad societal needs. Projects emerging from both the nonprofit and for-profit sectors have the potential to generate significant social and environmental benefits while also realizing financial returns. A key challenge to the sectors’ growth, however, is an inefficient flow of capital to opportunities.
Since 1997, the Bank has been leveraging its unique platform and capabilities to develop and scale mission-driven social enterprises. Through its leadership and collaborative efforts, the Bank has explored new pathways for other investors to direct their investment capital towards societal benefit. Deutsche Bank has consistently been a pioneer in the sector in responding to new and evolving needs; the 50 million US dollars Essential Capital Fund was most recently launched in 2012 to supply high-risk capital towards the growth of early-stage social enterprises throughout the world.
Deutsche Bank’s funds have supported a wide variety of high-impact social enterprises, including financing eye care hospitals in developing countries through the Eye Fund and supporting high-quality, low-cost education in Africa with Bridge International Academies. With its innovative social finance funds, Deutsche Bank is making markets work for all segments of society.
$ 1.67 bn
financing provided to micro-borrowers by Deutsche Bank since 1997.
G8 conference addresses social impact investment
For the first time, social impact investment has been discussed at the Group of 8 conference in London on June 6, 2013. In London, several keynote speakers addressed the topic, among them Colin Grassie, CEO of Deutsche Bank UK. He outlined the scale of social problems in the UK and highlighted the critical role the private sector can play in helping to tackle these challenges.
Grassie said: “With sufficient engagement from institutions like Deutsche Bank, impact investment has the ability to become an asset class of true significance. It should be fully integrated into the business model to make it not just a ‘nice to have’ but an integral part of business.” Deutsche Bank is one of the world's largest impact investment advisors. The G8 conference is expected to help boost the growing social impact investment market by exploring issues such as sustainable agriculture, affordable housing, clean technology, and financial services for the poor.
“A new model of ‘sustainable capitalism’ can emerge. My vision is for every asset manager to have a social investment fund.”