Profits with Purpose: Developing World Markets

43 entrepreneurs who are changing the world
Social Capitalist 2008 Winner

Profits with Purpose: Developing World Markets

Judy Kirst, Peter Johnson, Brad Swanson, Roger Frank, partners
Jim Kaddaras, managing director
Darien, Connecticut
dwmarkets.com

Mission

As a socially responsible fund manager and investment bank, Developing World Markets (DWM) has a single mission -- to use the capital markets for sustainable development. By creating investment opportunities that provide investors with risk-adjusted, market-rate returns, DWM expands the pool of capital to address such issues as poverty alleviation far beyond the relatively limited amounts of philanthropic capital which has historically financed development.

Strategy

The DWM team members all have two things in common: a strong background in finance and a strong sense of social mission. As Wall Street trained professionals, DWM has been able to deploy well-tested financial models and strategies in arenas that historically have not had access to the capital markets. Since completing the world's first cross-border securitization of loans to microfinance institutions (MFIs) and creating a model that has become an industry standard, DWM is now a leading institutional fund manager for microfinance with more than $250 million under management. Additionally, as an investment bank, the DWM team has raised more than $200 million for MFIs around the world through a variety of unique transactions.

As a financial pioneer, DWM has a long history of "firsts". These include:

  • The first cross-border securitization for microfinance, a two tranche, $87 million offering which financed 14 MFIs in 9 countries.
  • The first emerging market fund to focus on initial public offerings by companies, mostly small capitalization, in their local stock markets.
  • The first rated microfinance wholesale loan securitization, MFS XXEB, a $60 million offering which provided capital to 26 MFIs in 17 countries.
  • The first regionally-focused microfinance fund financed by international capital markets investors, Global Partnerships.
  • The largest private equity investment in microfinance, TIAA-CREF's €34 million purchase of a stake in a leading global microfinance network.
  • The first international capital markets bond issue for a single microfinance lender, the Microfinance Bank of Azerbaijan, which was also the first bond issue for any Azeri issuer.
  • Currently managing the largest microfinance fund exclusively targeted to financial institutions such as pension funds and insurance companies.

Goals

The goals of DWM are to both expand access to capital for microfinance and to use the models they've pioneered to help deploy capital to other areas of development. DWM is at the intersection of two macro trends which will continue to drive its growth:

  • With an estimated 2 billion to 4 billion poor people in the developing world lacking access to credit or many other services we take for granted, there is a newfound recognition of the potential market at "the bottom of the pyramid." Through its work in microfinance, DWM is able to help reduce global poverty by providing capital to this tier.
  • One of the fastest growing areas of investment is Socially Responsible Investing (SRI). Whereas most SRI investing is focused on "negative screening," DWM creates channels for investors to deploy capital in a proactive way, conferring positive impact on people's lives while achieving market-rate financial returns.

Success

Measuring the impact that microfinance has on people's lives is more of an art than a science. Assuming an average microfinance loan size of $1,000, the $500 million that DWM has raised from the capital markets for microfinance would finance some 500,000 microloans. Assuming an average family size of four, the direct beneficiaries would number 2 million, while indirect benefits are much higher from the expansion of economic activity and purchasing power created by the profitable micro-businesses.

The DWM group of companies includes DWM Finance LLC, member FINRA/SIPC, and DWM Asset Management LLC, registered investment advisor.