Brain gain in Latin America + LatAm’s women VCs, Zurich boosts climate-investment pledge, Bamboo…



Greetings, ImpactAlpha readers!

#Featured: Impact Voices

Brain Gain: Impact investing in Latin America’s new wave of startups. Here’s a provocative impact thesis: Supporting almost any forward-thinking, technology-based venture in Latin America is a form of impact investing. “Investing in companies that are using technology to close the region’s inequality gaps or to simply stop the brain-drain to other countries is not just good for business,” writes Nathan Lustig of Magma Partners, a Santiago, Chile-based investment firm, in a guest post on ImpactAlpha. “It is also an act of support for a knowledge-based economy and job growth in the region.”

Latin American entrepreneurs are taking on some of the region’s biggest challenges and attracting investment from a host international and homegrown investors — in Mexico, Colombia and Brazil, in particular. The Global Impact Investing Network describes impact investments as investments made in companies or organizations intended to generate social or environmental impact, alongside a financial return. In Latin America, that impact can be the creation of a new generation of entrepreneurs creating positive social change, through better work cultures and tech-driven services for the vast majorities of the region’s people.

Read, “Brain Gain: Impact investing in Latin America’s new wave of startups” from Nathan Lustig on ImpactAlpha:

Brain Gain: Impact investing in Latin America’s new wave of startups

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#Dealflow: Follow the Money

Zurich boosts its climate-focused impact investing pledge. After channeling $2 billion into environmental-impact investing in the past five years, the Swiss insurer plans to more than double its allocation to $5 billion for climate-related impact investments. Most of its initial investments have been in green bonds — a market that just crossed the $100 billion mark. (Listen to ImpactAlpha’s Returns on Investment podcast interview with Manuel Lewin, Zurich’s head of responsible investing.) The World Economic Forum estimates that $5.7 trillion needs to be shifted into green investing each year to put the world on a sustainable, climate-friendly development path. It seems that $5 billion is the magic number for institutional impact investment commitments this year. Denmark recently launched a $5 billion Sustainable Development Goal-aligned fund, while Swiss banking giant UBS pledged to direct $5 billion in client capital toward SDG-focused impact investing.

Bamboo Capital invests in credit-analytics venture First Access… A major barrier to improving financial inclusion globally is how to assess credit risk for unbanked and underbanked adults. First Access, a New York-based company, has developed a credit-scoring system based on an individual’s digital and data footprint, including mobile phone records, and social and demographic data. Emerging-market microlenders and other financial institutions can use First Access’ analytics platform to improve or develop lower-cost products for their borrowers. Bamboo Capital led the fintech company’s $7 million Series A round from its second Financial Inclusion Fund. The funding round was also backed by the Social Entrepreneurs’ Fund, Impact Engine, 500 Fintech, and Colle Capital.

While DOMO Invest backs low-income lender Noverde. Noverde is a mobile-based fintech startup that lends to low-income banked Brazilians who have difficulty securing credit from traditional financial institutions. Noverde reviews customers’ credit profiles through an online application and deposits approved loans of up to 4,000 rais into customers’ bank accounts, allowing them to repay over 12 months. The company claims its interest rates are lower than those of traditional lenders. DOMO Invest, a São Paulo-based startup venture fund, led Noverde’s four million reals ($1.2 million) funding round. DOMO has backed more than 40 Brazilian startups, according to Crunchbase; Noverde is the firm’s first investment from a new R$100 million ($31 million) tech-focused fund.

See all of ImpactAlpha’s recent #dealflow. Send deal tips and news to thebrief@impactalpha.com.

#Signals: Ahead of the Curve

Impact investors highlight list of women venture capitalists in Latin America. In Latin America — and globally — women are underrepresented among investors in early-stage tech startups, starving firms of talent, vision and opportunities. If there really is a diversity dividend (see “Brain gain,” above) impact investing is poised to reap it. The Latin American Private Equity and Venture Capital Association lists 43 women venture capitalists in the region, and a tally shows that nearly a quarter of them are impact investors. Eliza Erikson, a venture partner at Omidyar Network, manages a portfolio of Latin America education and fintech investments. Kim Matchlup is a partner at MOV Investimentos, an impact investor based in Sao Paulo, Brazil. Montse Mora manages Spectron, an early-stage social-venture fund in Mexico (she is also the CEO of fintech firm Frogtek). Johanna Posada is a co-founder and managing partner at Elevar Equity, which invests in businesses targeting low-income customers in Latin America and India. Julia Profeta Johansson is a partner at Vox Capital, the early-stage Brazilian impact investor now with a second fund. Others include Christine Kenna from Mexico’s IGNIA, Debbie Jaffe of Endeavor Peru, Monica Brand of inclusive-fintech investor Quona Capital, Maya Chorengel of both Elevar and The Rise Fund, and Susana Garcia-Robles of the Multilateral Investment Fund/FOMIN. FOMIN is hosting WeXchange 2017 on Dec. 4 and 5 in Santiago, Chile to connect women entrepreneurs in Latin America with investors and mentors.

#2030: Long-Termism

Financing small and mid-size businesses for the big global goals. The eighth annual Global Entrepreneur Summit kicks off tomorrow in Hyderabad, India with a focus on supporting women entrepreneurs. But whether owners are male and female, small and medium-sized enterprises have been have frequently overlooked when it comes to financing. Indeed, the International Finance Corp., part of the World Bank, has estimated that there’s a $2.6 trillion credit gap globally for SMEs in emerging markets. In some parts of Africa, Latin America and Asia, more than 60% of SMEs suffer from the credit gap. At the same time, SMEs are critical in emerging economies, creating four out of every five jobs and up to 40% GDP, according to a recent survey by BlueOrchard of lenders to SME lenders in the Caucasus, East Asia, Sub-Saharan Africa and Central and South America.

Small and medium-sized enterprises are pivotal in achieving many of the U.N.’s sustainable-development goals. As we reported back in June, such businesses serving Asian markets could capture more than 40 percent of the $12 trillion or so in new revenue and cost savings from SDG-aligned solutions. Possible targets: SDG №8 (Decent Work and Economic Growth) and SDG №9 (Industry, Innovation, and Infrastructure). They can also play a key role in meeting SDG №7 (Affordable and Clean Energy). A 2014 World Bank reportfound that there is potentially a $1.2 trillion market for SMEs in clean technology, including opportunities in waste management, small hydroelectric projects, onshore wind power and solar photovoltaics. (In the UK, up to 90% of clean-technology businesses are SMEs, the World Bank found, and this could be replicated in the developing world.)

SMEs need all sorts of financing instruments, including bonds, loan securitization, crowd-funding platforms and digital finance. One example of digital finance is India’s NeoGrowth, which makes working-capital loans to SMEs that receive non-cash payments — customers pay for the product or service on NeoGrowth-approved point-of-sale machines. Banks are important in terms of sheer volume, but other financial institutions (credit unions, cooperatives, microfinance institutions, etc.) are also crucial to meeting the financing needs of SMEs because they tend to have greater outreach to the informal sector and are more flexible on some lending terms.

Onward! Please send news and comments to TheBrief@impactalpha.com.

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