Conference Presentation, Panel
Financial Inclusion: Solutions for the Global 99 Percent
- New impact fund listings are projected to continue their upward trajectory, following a rise from 20 funds in 2009 to 44 in 2010 and 60 in 2011, with the total capital captured expected to surpass $40 billion, of which microfinance investment vehicles comprise approximately $8.3 billion.
- The impact investing sector is anticipated to grow exponentially over the next few years, driven primarily by the 5% endowment spending rule at U.S. foundations, which is expected to release significant capital, while equity participation in microfinance funds is forecast to expand at a substantial pace.
- Social Impact Bonds (SIBs) are expected to gain significant international momentum in both developing and developed nations, currently featuring 14 programs in the UK and pilots in the U.S., with future designs expanding beyond pilots to address issues such as sleeping sickness, HIV prevention, and rights development.
- The sector is expected to transition from bilateral funding to multi-stakeholder structures to facilitate cross-subsidization, while Endeavor Catalyst is projected for near-term growth and long-term evolution into an evergreen reinvestment vehicle with historical potential returns of 2.96% annualized, or nearly triple the invested capital over a decade.
- A massive $41 trillion in asset transfers occurring over the next 40 to 50 years is expected to yield only $5 billion to $10 billion annually for impact initiatives through traditional foundation models, creating a critical need to deploy "trapped money" in public and nonprofit funds more effectively.
- SIB returns are projected to range between 7% and 13% with caps around 13% to 15%, offering significant yields above the UK base rate of 0.5%, while large deals target $400 million with IRRs between 25% and 30%, and foundations may accept returns of 2% to 3% as an alternative to grants.
- Scaling efforts face constraints regarding intermediary capacity, which requires seed money for operating strength, and may encounter punitive Basel capital requirements, necessitating the development of new measurement tools and intermediaries with larger capital management capabilities.
- Structural and strategic evolutions include the use of L3Cs in the U.S. for revenue-neutral to revenue-positive outcomes in affordable housing, the "hardwiring" of social missions into contracts, the integration of dynamic feedback mechanisms to make data predictive, and potential debates over tax advantages structured as "moonies."