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New Social Investing Guidelines from the Grameen Foundation

Posted by Hannah.


By Flickr user mckaysavage If you're familiar with the person-to-person microlending site Kiva.org, or the work of Nobel Prize winner Muhammad Yunus and the Grameen Bank, you might be interested in the recently released Social Investing Guidelines from the Grameen Foundation.

Over the past several years the concept of microfinance (providing financial services to the poor), and specifically microcredit (providing small loans to the poor who would otherwise not qualify for traditional credit), has gained a lot of attention. Many see it as part of the solution to poverty – research shows that microfinance helps poor households meet basic needs and protect against risks. It's received its fair share of criticism as well – arguments include the fact that the touting of microcredit programs as a solution to poverty can lead to budget cuts for public programs, and that small loans generally do not lead to job creation which is fundamental for countries trying to reduce their poverty rate.

If you're interested in becoming a lender with a micro-lending site such as Kiva (where you can make loans as small as $25, choose the exact entrepreneur you want to support, and know that the default rate on loans distributed through Kiva is only 2.2%), or if you already are, you might want to read the Social Investing Guidelines. The guidelines are based on the Progress out of Poverty Index, a tool that measures poverty levels of groups and individuals. The Guidelines encourage individual investors to ask questions of the microfinance institutions they're working with, including: What measures are taken to ensure that investments really support the poor and poorest populations? and How does the investment manager define poor, very poor, and extremely poor?

Tools like these Guidelines seem crucial in order for micro-lending programs to truly be effective, accountable and part of the solution.