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July 11, 2007
MMA Helps People Far and Near With its New OneWorld Community Development Investment Program
    by Anne Moore Odell

MMA and the Mennonite Economic Development Associates have created a program for investors to help capital reach poor neighborhoods in the US and abroad.


An exceptional program was recently launched by MMA and the Mennonite Economic Development Associates (MEDA) to help bridge the capital gap between US investors and low-income and low-wealth people. The OneWorld Investment Program offers investors the choice of allocating their investment overseas or domestically, or even dividing their money between the two options.

"The OneWorld Community Investment Program is unique in that it offers individuals the option of targeting--through a single note--investments in international microfinance or dynamic faith-based community development here in the US," said Mark A. Regier, Stewardship Investing Services Manager at MMA. "We believe there is strong interest in the faith community for targeting investments based on vision-based impact, rather than geographic targeting."

OneWorld's international community development option, entitled mPower, will finance projects that work to help people move out of poverty. The domestic program, called nSpire, will focus on US faith-based community development projects.

MMA and MEDA are partnering with MicroVest, an international microfinance agency developed by MEDA, CARE International, and SEED Capital Development Fund, and the Calvert Foundation, a nonprofit provider of community investment products and services. Funds received in the OneWorld program for international microfinance will be invested via MicroVest. The Calvert Foundation, in consultation with MMA Community Development Investments, will channel investments for domestic community development directly to a wide range of faith-based community development organizations.

The Community Development products will be fixed-income notes with a term of one to ten years with a variable rate of 0-3%. This means that investors can chose the return they will receive on their investments, with the lower the rate, the more social impact for their investment.

OneWorld aims to help close the "capital gap" between wealth and poor markets, while also acting within the tenets of the Mennonite Church. MEDA reports that less than 10% of the demand for microfinance is currently being met.

"Imagine, if you will, the inherent imbalance of millions (or billions) of poor borrowers on the one hand, and only a handful of capital suppliers on the other hand," said Gerhard Pries President, MEDA Investments and CFO, Mennonite Economic Development Associates. "The OneWorld program is a small step to balancing that equation. We invite the Moms and Pops of the developed world to join the Moms and Pops of the developing countries in righting the capital imbalance."

Investors with as little as $1000 can take part in this program. Investors can purchase the OneWorld program through financial advisors or directly though MMA on-line.

Invested funds will purchase Community Investment Notes (CIN) issued by the Calvert Foundation. The CINs allow investors to earn a financial return while generating real-life returns for communities, measured by affordable homes built, jobs created, and lives changed. Calvert Foundation's team of investment professionals employ due diligence and risk monitoring to make the CIN a safe way to invest in high impact community development and microfinance. Calvert Foundation CINs currently have a 99.8% repayment record with no losses to investors.

"By using the Community Investment Note, the OneWorld Program benefits from the legal, regulatory, due diligence, and administrative expertise Calvert Foundation has developed over the past 11 years," explained Justin Conway, Sales & Information Officer, Calvert Foundation. "This allows MMA CDI and MEDA to offer their constituencies a new way to invest for high impact in a proven product, and keep most of the management and administration with Calvert Foundation."

Gil Crawford, CEO of MicroVest, explained that the revolution of the personal computer made it possible to track thousands of small loans made by microfinance institutions and keep down costs. Competition has also let the rates the poor pay for loans to drop. Unethical moneylenders, a.k.a. loan sharks, charge the poor up to 1000% interest on loans. A microfinance lender might start lending at 100% interest. However, when there is competition between microfinance institutions, MicroVest has seen rates fall under 30%.

"What we've seen, in country after country and market after market, is that if there is more than one microfinance institution, it drives down the cost," said Crawford. He pointed to MicroVest's experiences in Bolivia and Peru when competition in lending caused rates to drop.

Microfinance is changing the relationship US investors have with developing markets. In the past, Pries told SocialFunds.com, "The relationship between the people of the rich countries and with the people of the poor countries, can be characterized as an aid relationship. This is an inherently unbalanced power relationship. However, when we invest in the poor, we believe in them. In fact, we enter into an inter-dependent relationship."

Pries continued: "The micro-entrepreneur needs the OneWorld investor's capital in order to make her business thrive and thereby feed her family. Likewise, the OneWorld investor needs the micro-entrepreneur to thrive in order to generate a profit, which pays the interest on the investment. This interdependence is inherently more balanced than is a relationship of charity."

MMA points to new studies that show that there is more financial capacity among the poor/disadvantaged than was previously thought and, therefore more opportunity. However, it is still difficult to get capital into poor communities. That's where microfinance programs like OneWorld can come in and provide capital that lets the poor and their communities succeed.

MMA's Regier commented: "Community development investing helps those with limited means actively enter into the economic mainstream. This reduces dependence on public support/safety-nets and generates truly new economic activity. The poor have the opportunity to become real economic engines--creating truly new wealth--not just living as economic units to be preyed upon through various forms of wealth transfer to much larger financial systems. This is good for all of us to participate in the world economic systems."



 

 
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