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
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