Capitalization for U.S. Microfinance

In reviewing current market conditions and changes in philanthropic giving, the theme of stable capitalization in the field remains critical. This Webinar examines where the industry's capital has come from in the past, where it might come from going forward, and offers practitioner insight into these changing trends. Listen to the podcasts and Webinars and download other useful resources for your microenterprise program:

RESOURCES

• Overview of Capitalization Strategies • Podcasts/Webinars • Other Useful Resources for Practitioners

Overview of Capitalization Strategies

FIELD forum Issue 20 - Capital Structure - Getting It Right to Increase Sustainability (2008) Download PDF
This forum, the second in FIELD's sustainability series, examines how Justine Petersen, an organization in St. Louis, Mo., is pursuing equity capital as part of a scale-up and sustainability strategy. The publication explains how sustainability is a balancing act that involves keeping mission, organizational capacity and capitalization in line. It also describes how Justine Petersen has effectively captured earned revenue and performance-based grants, but still needs both to secure "smarter subsidy" in the form of less restrictive capital, and to begin using its assets to grow the organization and attract new supporters. Justine Petersen's multipronged approach to accomplishing those goals is detailed in the publication.

FIELD forum Issue 23 - The Organizational Foundations of Sustainability (2009) Download PDF
This forum, the fifth in FIELD's sustainability series, highlights efforts by ACCION New Mexico.Arizona.Colorado to systematically build a corporate culture, as well as capacity, that supports security, quality and growth for the long term. The publication describes how the organization built on what was working well and changed what was not, while also instituting innovations in both operations and capitalization - all with an eye toward achieving greater sustainability. Important lessons learned are highlighted in the conclusion.

Podcasts/Webinars

A Leading Edge Webinar, sponsored by Bank of America
“Raising Capital with an Individual Investor Strategy: the Ins and Outs”
This Webinar offers a discussion of the individual investor strategy to raise capital.  The presenters provide a deeper understanding of this capitalization structure and discuss both the costs and benefits of this strategy.  Practitioners will also learn about the most important steps in getting started in this area.
View Powerpoint
Download Webinar
Download MP3 version
Sample documents

A Leading Edge Webinar, sponsored by Bank of America
“Innovative Capitalization Strategies: What is Scalable?”
This Webinar will first give an overview of past and current capitalization strategies used in the field. Emerging strategies, such as online lending sites (Kiva, Microplace) and several other unique investment structures, will be explored. Practitioners will provide insight into these more recent innovative experiences. View Powerpoint
Download Webinar
Download MP3 version
Supplemental document

A TrendLines Webinar
"Trends in Demand, Risk and Funding: Market Conditions for Microlending."
What do data from MicroTest and the Opportunity Finance Network's market conditions study tell us about how the twin forces of the recession and financial crises are affecting microlenders? The Webinar also includes some discussion of the impact of these forces on capitalization.
Download Webinar
View Powerpoint
Download PDF of Briefing paper

Other Useful Resources for Practitioners

Lessons from Mountain Biz Works (MBW):
Under new leadership, MBW in North Carolina is currently (mid-2010) undergoing strategic planning that includes developing a diversified capitalization strategy. Several years ago, the organization created investor loan templates and documents to facilitate individual investment in its small business loan fund. Since then, the fund has remained relatively small, with about 17 contributing investors. Senior staff members are looking to scale this strategy and, as they have thought through the process, they offer the following advice to others considering this strategy:

Infrastructure: Scaling this strategy requires the appropriate front-end development strategy and back-end accounting systems (software and staff). MBW is currently building these components.

Reviewing Blue Sky Laws: Blue sky laws, intended to protect consumers, govern security offerings in each state. Discussion during FIELD's second Webinar on capitalization raised the issue as to whether these laws were applicable to the type of instruments used by organizations like the New Hampshire Community Loan Fund given that these offerings are not securities (no ownership position presented) but rather loans to the organization. However, MBW suggests erring on the side of caution and is using the services of a pro-bono securities lawyer to counsel whether the organization needs to register in each state where loans would be offered. MBW's new CEO's experience in developing these programs has been that laws may differ quite substantially from state to state and suggests organizations research this area thoroughly.

Dollars for Dreams: Scaling Microlending in the United States (2010) Download PDF
This is the second publication in a series on the experiences of the Scale Academy for Microenterprise Development.  Microlending practitioners will find useful lessons throughout in the exploration of their path towards scale.  Chapter on capitalization are particularly relevant to this theme.

Providing Capital, Building Communities, Creating Impact: FY2007 Data, Seventh Edition (2009) Download complete report
This publication, a product of the CDFI Data Project, documents the work of 508 community development finance institutions (CDFIs) investing $5.3 billion in new financing activity in Fiscal Year 2007, an investment linked to 34,276 jobs and 57,274 units of affordable housing. The report, based upon the most recent data set of CDFI activity, combines text, numerous charts and tables, and case studies profiling the successes of borrowers. A supplemental section, authored by FIELD, presents data on 115 CDFIs that engage in microenterprise lending. Download supplemental insert

Moving the Microenterprise Field Forward: Priorities, Strategies and Roles (2009)
Download PDF
This "white paper" summarizes discussions by microenterprise leaders who met in early 2009 to explore ways to strengthen and expand the industry, in light of the opportunities presented by the advent of new presidential and congressional leadership and by a changing economy. In addition to pinpointing a set of priority strategies needed to respond to today's environment, participants also identified - and committed to - specific action steps to advance the field's progress. Those strategies and actions are detailed in the paper. In addition to attending the meeting, participants used a wiki to share ideas and comments that are summarized in a supplemental document.

Findings from the Scale Academy - Forging Ahead: Early Lessons (2009) Download PDF
This publication is the first in a series based on the experiences of grantees in the Scale Academy for Microenterprise Development, a four-year effort to uncover innovative, effective scale-up strategies. Now midway through the project, this edition, Forging Ahead: Early Lessons, examines a range of strategies employed by the seven programs in the academy, and describes some of the successes, challenges and pitfalls they have experienced.