At Lendahand, you can choose from different types of impact investments for your portfolio. You can invest in microfinancing and growth financing with loans to financial institutions and corporate financing with direct loans to impactful companies. One thing they all have in common is that all of your investments make a social impact in emerging markets. Read on to learn more about what differentiates our borrowers.
Invest in Financial Institutions
Reach multiple small entrepreneurs at the same time
With an investment in a financial institution, you simultaneously offer loans to several entrepreneurs in emerging markets. Loans can either go to small independent entrepreneurs in the form of microfinancing or to small and medium-sized enterprises in the form of growth financing. So, you invest in financial institutions focusing on microfinance, growth finance, or both. Either way, you reach several entrepreneurs at the same time with one investment.
a) Microfinancing
What is microfinance?
Microfinance is a category of financial services aimed at individuals and small businesses that lack access to traditional banking and related services.
The Microfinance Institutions you invest in at Lendahand have a social mission and are dedicated to helping small entrepreneurs and low-income families. Consider, for instance, a shopkeeper who needs working capital to purchase merchandise and a carpenter who needs raw materials such as wood to prepare his customers' orders. These entrepreneurs often lack access to traditional banking services and tend to operate in the informal sector. Their local physical presence provides entrepreneurs with personal guidance and knowledge sharing.
b) Growth financing
What is growth finance?
Financial resources are crucial to growing and running small and medium enterprises. Think of a baker who needs a loan to install a new oven or an entrepreneur who can, thanks to a loan, build a new warehouse for his growing business.
Is a financial institution only offering growth financing to local SMEs? If so, it is increasingly digital lending platforms. These deploy technology to provide short-term loans to local entrepreneurs who do not have access to traditional banking services. Providing growth capital online means that entrepreneurs can take out loans faster and at lower interest rates, which allows them to be more flexible in their business.
- Characteristics of investing in microfinancing and growth financing:
- ✓ Interest rates between 4% - 8% annually
- Investing in a financial institution will earn you an annual interest rate between 4% - 8%. The credit score of these loans is A or B (on a scale of A to E). The historical amortization rate since 2013 for this investment category is 0.37%. Of course, this is no guarantee for future investments.
- ✓ Risks partially covered
- Investing in a financial institution is partially covered. The borrowers largely cover the risk of default and currency fluctuations (for investments in euro projects). In addition, they spread the investment over several different SMEs.
- ✓ Strengthen several entrepreneurs at the same time
- Small and medium-sized entrepreneurs in emerging markets are the biggest source of employment and socio-economic progress. Yet many such entrepreneurs struggle to access affordable financing to grow. With your investments with Lendahand, you give these entrepreneurs access to affordable loans, thereby contributing to the improvement of living standards, employment, and sustainable and inclusive economic growth.
Lendahand only selects financial institutions with a social mission that seek funding that allows them to offer affordable loans to local entrepreneurs. We also periodically evaluate their contribution to the UN's Sustainable Development Goals (SDGs).
Want to ensure a well-diversified portfolio? Invest automatically with Auto-Invest. Set your project preferences and achieve a portfolio that perfectly matches your financial and social ambitions using Auto-Invest.
Invest Directly in One Medium-Sized Business
With this type of investment, you directly invest in a privately owned for-profit business in an emerging market.
We primarily select businesses that are active in two sectors:
- Clean Energy: to businesses that provide families and enterprises in emerging markets with basic needs such as (clean) energy and make a substantial contribution to the reduction of CO2.
- Agriculture: to businesses in the agricultural sector that contribute significantly to providing food security in developing countries.
Both types of businesses usually provide physical products to their end customers, whether on credit or not. Through Lendahand, these impactful businesses get access to financing at a lower interest rate than is normally available to them.
- Characteristics of investing in privately owned businesses:
- ✓ Interest rates between 5% - 8.5% annually
- Investing directly in a business is rewarded with an interest rate between 5% - 8.5%. The credit score of these loans is B or C (on a scale of A to E), and the historical write-off percentage since 2013 for this type of investment is around 5%.
- ✓ Risks are not covered
- Lendahand only selects businesses that match our stringent financial criteria. However, this type of investment does not cover default risks, as there is no intermediary between you and the business. Yet, currency fluctuations (on euro projects) are hedged.
- ✓ Contribute to several SDGs
- Medium-sized businesses provide job security in their region. The companies we select for our crowdfunding platform must demonstrate that they make a significant contribution to the UN’s Sustainable Development Goals (SDGs). Annually, we request impact data from all borrowers. We use validated standards and indicators used by many impact investors worldwide to measure the impact.
How does Lendahand select borrowers?
A thorough research and due diligence process precedes every project you invest in. Our Investments Team is responsible for monitoring existing investment opportunities and finding, screening, and monitoring offerings for the Lendahand crowd.
Lendahand works with reputable and experienced institutional investment parties to cooperate with certain borrowers. They take charge of selecting and monitoring the borrowers. The collaborations open doors to certain sectors and countries where these partners have years of experience and an extensive network.
Lendahand is currently collaborating with the following external partners for the selection of certain borrowers:
Want to know more about the full selection process? Read more.