The Brief | December 4, 2019

The Brief: Neighborhood investment companies, inclusive fintech in Indonesia and Nigeria, solar financing in India, tele-health training, letter from Santiago

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Greetings, Agents of Impact!

Featured: ImpactAlpha Original

‘Neighborhood investment company’ helps Los Angeles residents buy back the block. Real estate shapes cities and neighborhoods and capital shapes real estate. A new model to enable local residents to buy into hyper-local property portfolios could start to reshape real estate capital, and thus the drivers of community wealth. In Los Angeles, Nico, which calls itself a “neighborhood investment company,” is on a mission: to localize wealth creation and broaden access to neighborhood equity. Nico has already acquired three rent-stabilized apartment complexes in L.A.’s Echo Park neighborhood. Early next year, the properties will be transferred to what the Los Angeles-based startup calls the first “neighborhood REIT,” or real estate investment trust, which will acquire, renovate and manage additional income-producing properties in Echo Park. “It’s an opportunity for radically more local people to become financial stakeholders in their neighborhoods,” says Nico’s Max Levine.

The Echo Park Neighborhood REIT, a public benefit corporation, will enable individuals to invest as little as $100 to own a share of the income produced by the real estate portfolio as well as its underlying value. Nico has closed on a $3.5 million seed round led by New York-based Collaborative Fund along with Alphabet’s Sidewalk Labs. The startup is among the innovative models bubbling up to reshape the real estate industry to create more broad-based ownership. In Oakland, the East Bay Permanent Real Estate Cooperative is raising money to develop properties and take them off the speculative market by placing them in a land trust. In Baltimore, StreetWell is helping build an “impact real estate portfolio” that will acquire properties and hire individuals “striving to overcome barriers” to renovate them, and turn over ownership to the workers and the community. In Philadelphia, the Kensington Corridor Trust, created by real estate developer Shift Capital and non-profit Impact Services, will buy property and hold it in a trust for the long-term benefit of the community. Nico hopes to create local REITs in additional neighborhoods. Says Levine: “It feels like this is a moment in time that is screaming for some new solutions.”

Keep reading, “’Neighborhood investment company’ helps Los Angeles residents buy back the block,” by Amy Cortese on ImpactAlpha.

Dealflow: Follow the Money

FinAccel raises $90 million for low-fee lending app. FinAccel’s mission is to improve financial inclusion for Southeast Asia’s “vast and fast-growing middle class.” In Indonesia, the majority of the country’s 265 million people lack access to formal financial services but do have cell phones. Deep mobile penetration is driving alternative credit and lending products, like FinAccel’s payment platform Kredivo. Kredivo lends online shoppers as little as $100 for their purchases. There’s no fee for complete repayments made within 30 days; customers can opt for low-interest installment loans of up to 12 months. The company says it has disbursed 30 million loans. The funding injection will allow FinAccel to add products, including low-interest education finance, healthcare finance and Shariah-compliant loans. Asia Growth Fund, a Korean growth-stage venture fund, and Australia-based Square Peg backed the round.

  • Inclusive fintech. Indonesia’s Amartha recently raised $18 million for its peer-to-peer microlending platform for entrepreneurs. Jakarta-based Julo, which offers low-interest, short-term personal loans, raised a $10 million Series A round in September. Last year, Oriente, a digital finance company launched by Skype co-founder Geoffrey Prentice, raised $105 million to expand its low-cost credit services in the Philippines, Indonesia and elsewhere.
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Nigerian fintech Migo scores $20 million.TPG Growth’s Rise Fund and Velocity Capital re-upped their investments in Migo, which helps banks and corporations modernize consumer credit underwriting. Brazil’s Valor Capital Group led the Series B round.

Encourage Capital backs solar financing company Electronica Finance. The New York-based impact investor invested in Pune-based Electronica’s $15 million funding round. It’s Encourage’s first deal from its solar finance fund (see, “Encourage Capital raises $40 million to help India’s small businesses switch to solar”).

Motivo secures $2.2 million to train a new generation of mental health professionals. The Atlanta-based placement service wants to improve access to mental health support in underserved and rural areas by helping recent graduates fulfill training hours through tele-health practice. Investors include Techstars and Next Wave Impact, a diverse founders-focused investment firm.

Signals: Ahead of the Curve

How impact investors can meet the challenge of Santiago’s protests. The COP25 global climate conference underway in Madrid was meant to be held in Santiago, Chile, before inequality protesters seized the streets. So was last month’s GSG Impact Summit, which moved to Buenos Aires (see, “Impact investing’s road to relevance led through Santiago – until it didn’t”). The Asia-Pacific Economic Cooperation summit set for the city was scrapped altogether. In contrast, Capria’s Will Poole and team decided not to cancel its trip to Santiago to scout deals and work with Chilean fund manager Fen Ventures, part of Capria’s portfolio. “We are global impact investors,” writes Poole. “What we do is work with local fund managers and investors to support entrepreneurs who build profitable and scalable solutions to exactly the types of problems that are causing unrest in Chile today.” In an essay on Capria’s site, Poole shared some takeaways from his trip.

  • What he heard. Tough political discussions lie ahead, says Poole. Among the issues of protesters: living costs are rising faster than salaries, healthcare is too expensive, education quality is too low, and opportunities to advance do not materialize. Poole knew his team wasn’t going to make subways cheaper or pensions pay out more or gin up necessary short-term solutions. Longer term, however, impact investments in local entrepreneurs can make a big difference, says Poole. “Done right, entrepreneurship can transform societies for the good.”
  • Why he’s staying. Chile has led Latin America for decades in growth on a per capita basis. Poverty has dropped from 31% to 6.4% since 2000. Life expectancy is higher than the U.S. Infant mortality is on par with industrialized nations. “I’m a long-term investor,” Poole says. He is “fully convinced that more public and private support of entrepreneurship can help address some of the issues exposed by the extreme protests in Chile and elsewhere in Latin America.”
  • More from Poole: “How entrepreneurship can help Chile and Latin America.”

Agents of Impact: Follow the Talent

Sundial Brands’ Richelieu Dennis is transitioning from his roles as chair and CEO to lead Sundial’s new Social Mission Board to scale Sundial’s economic empowerment and impact model (see, “Agent of Impact: Richelieu Dennis”)… Backstage Capital’s Arlan Hamilton is funding an Oxford scholarship for U.K. undergraduates of Black African and Caribbean heritage… CDC Group is hiring an equity investment director for forestry and wood processing in London.

Thank you for reading.

– Dec. 4, 2019