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

Agenda

•  Introduction •  Microfinance

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

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

•  Conclusion

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

“”

Microfinance Social Impact

Bonds

BoP Investment

Social Entrepreneurship

Microfinance Social Impact

Bonds

Microfinance

Microsavings Microcredit Microinsurance

Microcredit

$967 million

Outstanding Loans in US Dollars

8.37 million

The number of borrowers in the year 2012

96.67%

The recovery rate of funds loaned out

94%

The percentage of clients who are women

No collateral required

Group lending & monitoring

Variety of intermediate interest rates

Facilitates escape from poverty cycle

4 Key Features

Facilitates escape from poverty cycle

4 Key Features

No collateral required

4 Key Features

Group lending & monitoring

•  Alternative lending structure

•  Social pressures

4 Key Features

•  Traditional Banks<MFI<Loan Sharks

•  20%, 8%, 5%, 0%

Variety of intermediate interest rates

4 Key Features

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

Lack of Transparency Loan Renewal and Debt Cycle

Threat of Government Takeover

Criticisms

Financial Access to “Un-bankables”

Long Term Sustainability

In Summary

Application in Singapore

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

Singapore: The Asian Headquarters

for MF initiatives…?

Lending

•  Availability of funds •  Online lending

platforms

•  Microfinance Society of Singapore, Banking with the Poor network

•  Microfinance

Information Exchange Singapore:

The Asian Headquarters for MF initiatives…?

Engaging

Singapore: The Asian Headquarters

for MF initiatives…? Consulting

•  Consulting Services: Unitus Capital, Caspian, Philips Capital

•  Retail Microfinance

by Milaap Singapore

•  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

•  The  marginalised  

•  The  micro-­‐entrepreneurs  

•  Helping  ini2a2ves  •  Micro  Credit  Business  Scheme  

•  Other  proposals  •  Unrecorded  help  by  social  network  

 

The

Mar

gina

lized

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.

Micro-Entrepreneurship

Micro-Entrepreneurship

Micro Credit Business Scheme

Proposals in the Pipeline

Undocumented help by social network

• 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

Rich Country, Poor People

$15,000,000,000,000

Problem

Intervention

Problem

Intervention

Effective Prevention Programmes Have No Resources

Scale Proven, Preventive

Interventions

Improve Impact of Government

Spending

How to:  

?  

Social �Impact Bonds

Stakeholders

•  The  investor  of  capital  

•  The  operator  of  the  project  

•  The  payer  

The Investor The Operator The Payer

FUNDING

RISKS

RES

ULT

S

FUN

DIN

G

PROJECTS

The Investor

The Operator

The Payer

The Prospect

FUNDING

RISKS

RES

ULT

S

FUN

DIN

G

PROJECTS

The Investor

The Operator

The Payer

The Prospect

RETURN

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

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

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

Outcome-based incentives drive efficiency

Spur innovation

Measuring impact

Displacing existing solutions

Benefits Challenges

Application in Singapore

Obesity

2004 2010

6.9% 10.8%

Obesity Rates

•  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

Youth-at-Risk

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  

Australia

United States of America

Europe

United States of America

Reduce reoffending rates amongst youth Early childhood education

Portfolio Diversification Government funds channeled to other areas

Brings market discipline to the sector

Benefits

Financial Risks Execution Risks

Risks

Conclusion Social investment CAN be profitable

Social Financial

Q & A