Happy New Year! Welcome back to the Impact Esq.
- Finding the Right Capital. Consider a social entrepreneur looking to expand a maternity clinic chain serving very poor women in Kenya. The impact space has invented alternative vehicles that blend debt and equity while it also allows enterprises to navigate this problem. One example is revenue-based financing, which is already used to produce movies, and in other industries. You pay a percentage of your revenue each month, so if you don’t have revenue in a given month then you don’t owe anything that month. It can be deferred, there are often caps on it, and allowances for it to take longer than expected for the investor to get their return. That’s very different to how debt and equity usually work, which is very time-bound, rather than bound to revenue when you have it. It takes a lot of time to grow a clinic, to get several of them to break even. Fuqua (8 minutes)
- Virginia is for… Entrepreneurs. Virginia entrepreneurs have a new, one-stop-shop to access capital needed to start and grow their businesses. Rather than find and pitch potential investors separately, the Virginia is For Entrepreneurs (VA4E) asks startup founders in Virginia to fill out one “common app,” which will put their pitch in front of the dozens of investors already signed up to the platform. The goal is to help entrepreneurs, regardless of background, location, or industry, access the capital they need to grow. org (8 minutes)
- Development Impact Bond. The UBS Optimus Foundation is launching the first Development Impact Bond (DIB) in the field of healthcare. The foundation, which is the philanthropic arm of the Swiss bank UBS, will invest a total of $3.5 million (CHF3.45 million) to help reduce mother and infant mortality rates in the state of Rajasthan in northwestern India. Rajasthan has one of the highest maternal and newborn mortality rates in the country – 244 maternal deaths per 100,000 births and 47 infant deaths per 1,000 live births. The investment will be used by the non-governmental groups Population Services International and Hindustan Latex Family Planning Promotion Trust (HLFPPT) to help 440 private health clinics deliver better healthcare to expecting mothers. Depending on the number of clinics receiving accreditation, UBS Optimus could receive up to 8% interest on its investment. As an investor, UBS bears the risk of losing money if the targets are not met and can make a profit if targets are exceeded. The money will be paid out by the United States Agency for International Development (USAID) and Merck for Mothers (MSD for Mothers), which have committed up to $8 million. If successful, it could save over 10,000 lives in India. SwissInfo (5 minutes)
- US Development Bank. According to inside sources, the United States Congress and the Trump administration are considering plans for a new development finance corporation that would likely see an expanded OPIC. The new bank could also absorb other agencies or functions related to development finance, such as the U.S. Trade and Development Agency and the U.S. Agency for International Development’s Development Credit Authority. The administration will likely include language about a newly empowered development finance corporation in the fiscal year 2019 budget request. The National Security Council has also been looking at the proposal as a way to strengthen U.S. economic diplomacy. Devex (6 minutes)
Impact Esq is a monthly email summarizing the best articles on social enterprise and impact investing law edited by Kyle Westaway – Managing Partner of Westaway, Lecturer on Law at Harvard Law School and author of Profit & Purpose. If you like what you’re reading please share it with other social impact attorneys. Have a restful and thoughtful weekend.