Local investors, including McKinstry Chief Executive Dean Allen, the Seattle Foundation and Seattle University, are finding that returns from a microfinance nonprofit are among the best performing investments in their portfolio. The returns are both financial and social.

They have each contributed to a new $20 million fund that will provide capital for Seattle-based Global Partnerships' lending partners in Latin America. The fund offers a 4 percent annual return on a five-year investment.

MARK HARRISON/SEATTLE TIMES

Sandra Garcia, a small business owner in Nicaragua, has financed her shop through capital raised by Seattle-based Global Partnerships.

But along with the money, the Social Investment Fund 2010 includes a requirement that 75 percent of the lending institutions offer services such as preventative health education and business training.

As the microfinance industry grows with an influx of capital from banks, some have come under scrutiny for charging high interest rates and profiting on the poor.

Global Partnerships CEO Rick Beckett says he aims to strike a balance between helping people in poverty get services they need, and earning a modest return for investors.

"We're trying to target investment to things that matter from a social point of view," Beckett said.

Jerónimo Oporta

Edelma Altamirano (right), a Nicaraguan shop keeper, is healthy now after treatment for cervical cancer, which she discovered during an exam offered by her micro credit lender Pro Mujer. She will be in Seattle Oct. 12 to speak at Global Partnerships annual luncheon.

The group's "microfinance plus" approach shows how some programs are expanding beyond loans to health care and education, using the inroads made by microcredit networks to reach borrowers with other services.

One of the lenders that Global Partnership funds, for example, also provides cancer screenings for its clients. Pro Mujer, which operates throughout Latin America, offers basic health education before and after repayment meetings to discuss nutrition, hygiene, pre-and post-natal care and family planning.

Jane Stonecipher, a former technology executive who now works with nonprofits, said those services were an important factor in her decision to invest into the fund.

On a recent trip to Bolivia, she visited two local microfinance organizations and attended village banking meetings where women gathered to make payments on their loans. At the meeting, they also heard a talk about nutrition. A nearby clinic offered health screenings and immunizations for their children.

CHRIS MEGARGEE/GLOBAL PARTNERSHIPS

At a village bank meeting outside La Paz, Bolivia, borrowers get a lesson on nutrition.

"It seemed to me these people were largely living off the grid.," she said. "I'm not sure they had a lot of sources for health care."

Trust built up through the credit programs encouraged them to take advantage of the other services, she said. "Not only to take control of the family's finances but also to make decisions about their health," she said.

This is her first foray into social investing. "There are a lot of ways to invest in emerging countries," Stonecipher said. "What makes this special is the personal benefit to the women."

A project called Money for Good released a study this week estimating a potential market of $120 billion for investments with financial plus social or environmental returns.

Of the fund's 39 investors, 22 of them are new. Their investments range from $100,000 for individuals, up to $500,000 from family foundations and religious pension funds, $1 million from larger foundations, and $5 million to nearly $7 million from development banks.

"It has been one of our best investments in the economic downturn," said Ron Smith, vice president for finance and business affairs at Seattle University. The fund's goals also align with the university's mission. "It's a social justice issue, and that's what we're about."

Seattle University contributed $500,000 from its endowment's fixed income category into the new fund and has invested $1 million into Global Partnerships since 2006.

GLOBAL PARTNERSHIPS

Rick Beckett is CEO of Global Partnerships.

Smith said the investments have turned out to be "very dependable" and less volatile than other, more traditional investments.

By pooling money from donors and creating a debt fund, Global Partnerships lowers the risk for investors. The borrowers in Latin America repay the microfinance lending institutions, those institutions pay back Global Partnerships, and the nonprofit repays investors quarterly interest. The borrowers' repayment rate averages 98 percent.

Beckett said his organization's goals include offering lower interest rates to borrowers, reaching more rural poor and finding enterprises that could grow into small businesses that employ others. He expects the 2010 social investment fund to provide capital to 20 microfinance institutions that focus on social good and reinvest profits in programs to help borrowers.

"Microfinance plus" investments are "highly impactful but not highly profitable," he said.

"You can sell life insurance along with loans and make a lot of money," he said. While integrating business training or access to health care raises costs, Beckett thinks over time "some of things will be fully sustainable because the customer will value them so much."

An online discussion continuing Wednesday will focus on integrating microfinance with health services.

For more on social investments, Drew Tulchin, managing partner of Social Enterprise Associates, will discuss how to assess the social impact of businesses in developing economies Thursday evening at the University of Washington.