| This study examines the benefits and limitations of U.S. socially responsible community investment (SRCI) used as loan capital by microfinance institutions (MFIs), which lend to low-income entrepreneurs in developing countries. The accelerating worldwide demand for microcredit capital exceeds the capacity of donations. Most MFIs are unable to fill this void with commercial rate bank loans. SRCI is rapidly growing, with investors seeking both financial and social returns. The study examines its current and potential role and finds SRCI capital offers an appropriate and useful capital source to MFIs.;This research examines nine SRCI debt mechanisms, which collectively have lent ;To understand SRCI's investors and the lending SRCI makes possible, the Nicaraguan Community Development Loan Fund (NCDLF) serves as a case study to analyze: (1) SRCI sources--what types of individuals and institutions invested and what investment terms they chose; and (2) SRCI uses--what types of microenterprises and small businesses benefited. SRCI is beneficial to a wide diversity of borrowers, economic sectors, lending methods, loan terms, and locations. NCDLF offers an important model to MFIs that are able to borrow internationally, seek financial sustainability, and lend to borrowers in the informal and formal sectors.;The study defines the major benefits of SRCI. SRCI helps MFIs transition to commercial rate credit. It provides longer term capital to productive and agricultural enterprises, which are difficult to finance with shorter term, commercial rate capital. Its lower cost allows for subsidies of business development services. Major SRCI limitations are detailed. The study concludes that the benefits outweigh the limitations for both MFls and investors. Policy changes are suggested to encourage an expansion of SRCI investment internationally. ftnDisclaimer: This document does not constitute an endorsement by the author, an offer to sell, or a solicitation to buy any of the investments discussed herein. |
