Archive for May, 2011

lower crime rates and higher investment returns: what’s the connection?

May 20, 2011 Leave a comment

 Social Impact investing is the new buzzword in social enterprise circles in the UK today. Impact investing basically refers to the process of financing long-term social programs that tackle social problems, but that are supported by government and only on their success do investors make a financial return.  This is done through a social impact bond which is a financial instrument created by Social Finance (a London Private Equity Fund), this bond is sold to private investors and institutions and only pays out a return if the programs it has invested in (eg lower conviction rates for criminals, reducing homelessness and Teen pregnancies etc)  actually show improvement. In this way investors are actually able to get richer by doing good. 300million has already been poured into social investment in Britain and the social investment market is itself estimated to grow in  the next decade to over 500 billion dollars.  The idea is catching-on, Obama’s white house has put aside funds to fund trials of similar bonds for the next fiscal year.

This is very interesting space that combines the need for solving the world’s problems but with an underlying commercial incentive, in other words a totally win- win scenario, let’s watch what happens when the US catches on this very innovative idea……

Categories: consumer loans

microfinance for londoners takes off

May 11, 2011 Leave a comment

Micro finance is no longer just the preserve of developing countries such as India or Uganda; London is now one of the fastest growing markets for small loans for lower-income individuals. On May 9, 2011, Fair Finance, the first firm to offer micro finance to East Enders in London received 2 million pounds from two large UK banks to expand its lending  to reach even more lower-income Londoners. Faisal Rahman, the founder of Fair Finance says that although the interest rates charged on loans average about 53%, this is still much lower that what the payday loan sharks charged which could be anything from 1000% to 13000%.  ‘Fair Finance is a cheaper alternative to Loan sharks and payday loans as our clients do not have access to the conventional banking system’.

Fair finance’s mission is to help clients get away from loan sharks and predatory lending but ultimately to help these individuals find their way into the mainstream banking system. Its interesting however that the very same banks that say no to lending to these individuals are the same ones that are funding Fair Finance’s expansion? this is probably their way of offloading the lending risk to someone else and helps them look good in the process as they look like they are helping the local community…!!!

Categories: consumer loans