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Lecture highlights impact investing

| Monday, March 30, 2015

In the fourth lecture in the Ten Years Hence series, Tara Kenney, managing director at Deutsche Asset & Wealth Management, spoke Friday on the significance of impact investing in emerging markets.

“Impact investing is a concept that has gained a lot of traction in our market today,” Kenney said. “There is a way forward in terms of promoting inclusion for the masses in our society today.”

While 2 billion people live in poverty and lack access to basic financial services, technological improvements have the potential to deliver these services to the impoverished, Kenney said.

“For the first time in history, major developments make it realistic to imagine a world where we can change this,” Kenney said. “Technology, especially digital and mobile communications, big data and micro-finance make a vision of a financially inclusive world a possibility.”

Kenney, who also serves as a board member for Accion International, a nonprofit organization that supports microfinance institutions, said the company is setting the example in the field of impact investing.

“We’ve tried to build the next frontier of financial institutions,” Kenney said. “We’ve pushed them to think outside the box and tried to build a strong industry, and, moreover, as a leader in the space we feel it incumbent on ourselves to be the role model for what is and is not ethical in this sector.”

Kenney said though the majority of people in developing countries lack access to traditional banking channels, many of these people have access to cellphones.

“Eighty-eight percent of the world has a cellphone in their pockets, and almost half are in emerging markets,” Kenney said. “Even in some of the most remote corners of the world, you have access to Internet and Facebook.”

Providing access to financial services for this impoverished yet technologically literate demographic is a potential source of economic growth, Kenney said.

“By 2025, the emerging markets will be roughly be half of the world’s consumption standards,” Kenney said. “If you take a look at the lowest segment of the population earning less than two dollars a day, that can be a huge marketplace for banks and growing consumer goods markets.”

Kenney said Accion, which has helped build 63 microfinance institutions in more than 30 countries, carefully selects possible investments to ensure that the organization can maintain future growth.

“Working towards scalability and profitability is our mantra,” she said. “We have to remain relevant and look to the future.”

Part of Accion’s success in securing profitable investments comes from taking calculated risks in environments the company knows well, Kenney said.

“It was incumbent for [Accion] to invest where others would not go,” she said. “It’s enabled us to grow our platforms and to be a standard-bearer in the industry to understand things like capital protection and over indebtedness.”

Kenney said Accion operates in an environment which encourages collaboration even among traditional business rivals.

“We’re working both with MasterCard and Visa to promote access to credit cards in emerging markets,” she said.

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  • Hugh Sinclair

    Let’s not forget that Accion is also a principal shareholder in Mexico’s notorious Banco Compartamos, caught charging interest rates of up to 195% per year to vulnerable Mexican women (evidence from the Centre for Global Development in DC). The bank’s hugely profitable IPO yielded astronomical returns to Accion but was widely criticised by the microfinance sector as exploitative, including by Yunus himself. Deutsche Bank’s own history in microfinance is not without controversy, as they were exposed by the New York Times for having discreetly invested in a fraudulent Nigerian bank, LAPO, despite having very clear knowledge of extortion and illegal practices at this questionable institution. Is Ms. Kenney able to comment on either event? Does she find it disheartening that the Nobel Peace Prize winner Yunus has very clearly criticized the precise activities she promotes?

    http://www.bloomberg.com/bw/stories/2007-12-12/online-extra-yunus-blasts-compartamos

    http://www.cgdev.org/blog/does-compartamos-charge-195-interest

    http://www.nytimes.com/2010/04/14/world/14microfinance.html?pagewanted=all&_r=0