February 14, 2012

Community Blogger Lonnie Shekhtman: My Intro to Impact Investing

Allow me to make a confession: I don’t invest in anything. In fact, when it comes to money management, I am woefully unsophisticated. For instance, I have some money sitting in a conventional savings account, where it collects zero interest.

Now, I’m not loaded, by any stretch of the imagination, but I do have enough savings to do something useful with, so I’ve decided that 2012 is going to be THE year I finally get hip to investing my hard-earned cash. And I am particularly motivated this year because impact investing—which focuses not only on financial returns but on social and environmental ones as well—has seriously piqued my interest and provided the inspiration to invest that I’ve been missing.

I have a keen personal and professional interest in mission-driven business in general, and I’ve been keeping a close eye on microfinance specifically, because when done right, it is one of the most effective ways to help the poor cope with poverty and move from survival to planning for the future. Granted, the industry has had some ups and downs and still grapples with the occasional controversy, but I believe that responsible brokers and microfinance institutions (MFIs) are making an impact in impoverished communities around the globe, so I’ve decided to take a closer look at investing in microfinance projects through MicroPlace.

Here are the primary reasons I’ve decided to be a MicroPlace investor:

  1. Impact investing makes perfect sense to me: While I want to help people who are way less fortunate than me, I know that giving money away is not a sustainable option (plus, I can’t afford that option) so I’ll invest in microfinance institutions that are providing loans, savings, and other basic financial services to people who have traditionally had no access to such services. Not only do I anticipate getting my money back with interest, but I will invest in people who really need the help.
  2. The issuers MicroPlace works with (who sell the investments to folks like me and use that money to fund projects), historically have had a 100% repayment rate to MicroPlace investors, so the risk of losing my money is relatively low.*
  3. The rate of return on MicroPlace products (MP: .5% – 3.1%) may be more attractive  than certain short term accounts or products offered by my bank.  Of course, my bank accounts are FDIC insured -or insured by the government- whereas investments on MicroPlace are not.  There may be other material differences depending on the actual products.
  4. Many short term investment options offered by my bank have high minimums, whereas I can invest as little as $20 through MicroPlace. Depending on the actual bank product, there may of course be material differences and risks than the products offered on MicroPlace. 
  5. I feel confident about investing through MicroPlace because it is registered with the SEC, owned by eBay, and operated by PayPal, the biggest online payment company in the world, processing tens of billions of dollars in financial transactions.
Over the next several months I’ll be writing a series of blog posts about my experiences as a new impact investor. I’ll explore the variety of investments available through MicroPlace; the various issuers MicroPlace works with, and the projects and MFIs they support; the process of opening a MicroPlace account and making investments; and other learnings I pick up along the way. I hope you’ll join me on this journey and chime in with your own experiences and questions.

-- Lonnie Shekhtman
Lonnie is not an employee of MicroPlace and is paid by MicroPlace to produce her blog series.

*MicroPlace note: Past performance is no guarantee of future success; you should always read the prospectus before investing.

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