Could impact investing provide double-digit returns?

Could impact investing provide double-digit returns?
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Providing access to credit is a social impact initiative

More than 1 billion people in Asia still have no access to formal financial services — meaning, no formal employment, no bank account, no meaningful ability to engage in commerce online or offline. By some estimates, only 27% percent of adults have a bank account, and only 33% of firms have a loan or line of credit. The only way for them to get the loan is to turn to alternative lenders, non-banking financial institutions aimed to solve the problem of financial inclusion.

Impact lending to alternative credit providers

Low regulatory restrictions compared to the bank industry provide alternative lenders with an opportunity to go to the client’s niches unavailable for banks. Technology driving alternative lenders powered by digital distribution, big data credit scoring, and low-cost customer services capture an increasing market share in the region. Unfortunately, alternative lenders have limited access to funding. They can’t attract deposits as banks do, bonds are also unavailable due to the size of the business. As usual, they are financed by equity or expansive private debt some-time exceeding 20% p.a. cost of funding.

Kilde, impact investment exchange in Asia

At Kilde, a Singaporean investment platform for alternative assets, we do our best to help impact lenders to raise debt from institutional and accredited investors. Our complex data-driven approach helps investors to get 7-11% risk-adjusted yield by investing into impact lender’s private bonds issued on the regulated platform.

We carefully select alternative lenders with strong financial performance and a sustainable impact lending approach. Kilde partners with a variety of alternative lenders in the region that provide a wide range of services to underbanked customers in Asia:

  • Education loans in Indonesia
  • Salary loans in the Philippines
  • Micro SME loans in Singapore
  • Car loans and property loans for entrepreneurs in Kazakhstan
  • SME loans in Indonesia.  

Social impact of educational and salary loans

One of the examples of the impact lenders is Pintek, a financial technology company aiming to democratize access to education in Indonesia through affordable and flexible credit. The company services all educational expenses from kindergarten and high school to university, postgraduate and vocational training programs.

One of the examples of the impact lenders raising funds on our platform is salary loans provider in the Philippines, a subsidiary of the international group Robocash. The company partners with employers and helps their employees to become financially healthier and happier. The salary-linked solution helps employees to receive salaries in advance or get affordable long-term loans.

Returns on social impact investments

Image source: McKinsey & Company, A closer look at impact investing, February 2018

The industry is becoming more attractive for equity and venture investors. As McKinsey's research has shown, the investments averaging at $13M yielded between 0-18% p.a. Among the shareholders of some of our partners are the top-rated venture funds and international groups. It helps lenders to improve their capital structure and increase the sustainability of the business.  

The client base of our partners exceeds 5 million underbanked people and SMEs. Access to funding helps impact lenders to provide better and cheap services to their clients. Thanks to the support of investors, someone from Indonesia or the Philippines could get a loan to send their children to school or open their own small business.

Kilde is a regulated investment platform for alternatives. We operate as a two-sided platform connecting institutions / HNWI with securitised private investments. Our main alternative asset classes are private debt, venture debt, and recurring revenue financing. Kilde has partnered with leading non-banking consumer & SME lending firms to give investors safe and controlled access to consumer lending assets. Our unfair advantage is vast accumulated data on consumer & SME assets performance as well as scalable investment and securitisation tech platform. Thanks to Kilde’s license for dealing in securities, we securitize alternative investments into digital securities.

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