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Alternative Investments are an asset class with a specific meaning in financial markets. It usually refers to more risky ventures—
Although these individual investment vehicles are more risky than bonds and traditional equity investments in a well-diversified portfolio, these assets should add return while reducing overall risk. In religious/faith based/socially responsible investing circles this term has an entirely different meaning. Alternative Investments provide capital to persons who are under served by traditional financial markets. Included in this asset class are
The purpose of these funds is to make capital available to persons who are unable to get a business loan, car loan or mortgage from traditional banks. Long-standing Commitment The BVM congregation started its Alternative Investment Fund in the late 1980s. The original fund had less than $500,000 in it and the first investments were made to community development banks, credit unions and a few individuals. In the late 1990s this fund became a separate stand-alone fund. Over the past several years we have added capital to the fund and currently we have 142 investments with different social services agencies, housing funds, community development banks and credit unions, micro lending funds and individuals. Developing Countries One micro lending fund we have made a loan to is ACCION International. “ACCION’s mission is to give people the tools they need to work their way out of poverty by providing ‘micro’ loans and business training to poor women and men who start their own businesses. “ACCION helps people make their way up the economic ladder with dignity and pride. ACCION seeks to bring this opportunity to as many of the world’s poor as possible.” (2002 Annual Report) (www.accion.org) One of the keys to success in these micro lending funds is that the funds provide not only capital, but also business expertise to help their clients succeed in their businesses. Some of these funds have circles of borrowers who meet on a regular basis to provide assistance and encouragement to each other. Another micro lending fund is the Nicaraguan Credit Alternatives Fund (NICA Fund). This fund is sponsored by the Wisconsin Coordinating Council on Nicaragua and, “Since 1999 this fund has sponsored loans to more than 6,000 disadvantaged Nicaraguans, helping them earn a living as carpenters, shop owners or through other productive activities. About half the borrowers (51%) are women.” (website prospectus at www.wccnica.org/nica.html) South Africa The Alternative Investment Fund also holds investments in micro funds in South Africa. Two of the most prominent of these funds are SHARE and RISA. Small Enterprise Foundation (SEF) is a recent beneficiary of a guarantee arranged by the Shared Interest/Thembani International Guarantee Fund (TIGF). (www.sharedinterest.org). SEF works in Limpopo, the poorest province in South Africa. Its loan repayment rate is 98.7% during its 12-year lending history. (Shared Interest: In Focus, Spring 2004) This outstanding repayment record is common among micro-lending firms. Members who borrow funds know how important it is to repay the funds so others in the community can also borrow. Many of these funds help the borrowers set up savings account for future needs and to attain financial independence. Improving Lives Although the financial returns on these investments are generally below market returns, the social and economic returns are in the millions as people are given the opportunity to change their lives by starting a business. This business provides income for food, housing, reinvestment in the business and, most important, funds for educating the children in the families involved. As each business succeeds, the ripple effect throughout the region’s economy helps propel more and more persons and families out of a subsistence existence into a life of economic independence. This in turn has positive effects on the country’s economy as these economically disadvantaged communities move toward self-sufficiency in the world economy. About the author: Margaret Mary Cosgrove, BVM is treasurer of the BVM congregation. Photo: Accion International Annual Report. Return
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Alternative Investments: