Is microfinance true impact investment?

Mal Warwick Posted by Mal Warwick, writer.

Mal Warwick is an ex-Peace Corps volunteer (Ecuador 1965–69) turned entrepreneur and impact investor who has championed social and environmental responsibility in the business community nationwide for more than two decades.

Is microfinance true impact investment?

SKS Microfinance clients in India. Did microfinance chase profits at the expense of the poor the industry purports to help? Photo by: Kalyan Neelamraju / CC BY-NC-SA

Here is Part 2 of a two-part article co-authored by Mal Warwick, Paul DiLeo, and Paul Polak for 

Is it possible for the microfinance industry to attract enough capital if it refocused its mission and objectives on the overriding goal of reducing poverty? To answer that question, we need to examine microfinance in the context of impact investment.

Microfinance today as impact investment

Microfinance has led the way for impact investing by charting the path to engaging private institutional and individual investors. Debt funds offer a range of returns, reflecting liquidity and currency, and the first full vintage of nine microfinance equity funds is now reaching the 10-year mark, with most likely to achieve positive annualized returns to investors ranging up to the mid-teens.

But the industry’s success in attracting and rewarding capital raises fundamental questions, such as:

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