Changing the World, One Tiny Loan at a Time

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The New York Sun

Why has microfinance become the hot topic of the philanthropy set? A conversation with two successful veterans of the rough-and-tumble hedge fund industry, Leslie Rahl and Leslie Lake, sheds some light.

Ms. Rahl, who once ran Citibank’s derivatives business and now heads up Capital Market Risk Advisors, and Ms. Lake, who manages the hedge fund portfolio of the Invus Group, have earned their stripes in the financial world. Both are intense and tend to verbally dissect financial problems at a dizzying pace. Certainly, neither could be described as a soft touch.

Nonetheless, as founding members of a group called High Water Women, they have raised $1 million over the past 12 months to be given to a variety of charities in the New York region that assist women and children. They are just getting started.More recently, they have gotten caught up in the microfinance juggernaut, hosting three symposiums on the topic that drew standing room-only crowds.

Microfinance is the lending of very small amounts of money, normally less than $200, to impoverished people who want to start up or expand a self-sustaining business.The success of the approach, which includes the establishment of peer groups of borrowers who support and encourage each other and the availability of helpful business counseling, in regions like Africa has attracted considerable attention.

As loans are paid back, they are recycled, providing organic growth and the ongoing improvement in the lives of an expanding number of people.

Enthused by the concepts discussed at the most recent symposium (chaired by New York State’s banking superintendent, Diana Taylor), Ms. Lake just left for Ghana and points east (or possibly west) for a fact-finding trip, to explore the micro-lending activities of various institutions. She says she is as astonished by her conversion to philanthropy as anyone, noting that professional women are rarely approached about charitable donations. Until recently, Ms. Lake said she had been almost obsessively focused on her career.

“I was the original anti-philanthropy person,” she says. Then she met the people at Strive (Support and Training Result in Valuable Employees), a program helping women get off welfare and into the work force, and was hooked.She now serves on the board of STRIVE, which appealed to her aversion to what she calls “the freebie concept.”

Inspired by her first taste of giving back, she joined Ms. Rahl and a few other senior women in the financial arena in founding High Water Women, taking the name from a feature of the fee arrangements of many hedge funds.The organization is dedicated to philanthropy and volunteerism, and aims to encourage successful women to give back. In addition to seeking monetary gifts, the group also wants women to lend organizations their intellectual capital.

HWW is still in its infancy, and the board of seven highly placed women is in the process of defining the role of its members.What is clear, however, is that the members (an imprecise number falling somewhere between the 100 or so people who recently attended an event and the 1,800 on the e-mail list) are excited by microlending.

The recent five-hour gathering featured speakers from the Grameen Foundation, Accion International, and Women’s World Banking, all giants in the field.The presentations galvanized the HWW crowd, some of whom returned to their offices and immediately booked flights to Africa.

What’s the appeal? According to Ms. Lake, the attraction is that microfinance “seems to work. It doesn’t take much, but you have the ability to empower other women. You can change a life.” Also, microlending clearly stands up to the scrutiny of those interested in the bottom line.

Is microfinancing available only to women? Apparently not, but the success rate for women is higher than for men, who tend to be less reliable clients.Consequently, about 75% of the clients are women.

Some are given money (often as little as $20 or $30) to buy extra farm animals or to expand a baking operation or start a hairdressing business. For very little money, one can finance a woman’s livelihood, often allowing her children to go to school. Without a doubt, microfinance offers up a “ripple in the pond” aspect, where small investments can have a far-reaching impact on communities.

Could it work in America? HWW is looking into this question, but is not optimistic. First, any start-up business with a chance of success normally requires substantially more funding in America. In addition, as Ms. Rahl points out, America does not have as much of a gender gap as the developing world. If someone has a decent business plan in America, male or female, they are likely to find funding from traditional for-profit institutions or government agencies like the Small Business Association.

The HWW people are looking into working with for-profit microlenders as well as with not-for-profit groups.As the activity has taken root, large commercial banks are entering the arena as well. However, they are rarely interested in making the truly small-scale loans that characterize most microlending.

The involvement of High Water Women in the microfinance world will not be confined to writing the occasional check. As important, they intend to lend out their financial expertise.

Ms. Rahl already has helped out by finding a suitable currency desk for one outfit needing to hedge its exposure to various thinly traded African currencies. HWW also expects to help micro-lenders find ways to securitize their loan portfolios so as to make them attractive to socially minded institutional investors.

These women think big. If they are not satisfied with the banking facilities available for some of these activities – why not start up a bank? As Ms. Rahl says: “We don’t want to reinvent the wheel; we just want to change the world.” And so they may.

The New York Sun

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