While feathering retirement nest, put eggs in global poverty basket

from The Chronicle

By BLAISE SALMON and ALEC SOUCY

There is one important RRSP investment option you should know about. Instead of using your investments to only generate money for your "golden years," it could also simultaneously help families in the developing world climb out of poverty.

A few Canadian financial institutions have created microcredit investment programs that are safe for investors, RRSP-eligible, fully guaranteed and pay a reasonable interest rate. Microcredit has helped millions of families living on less than a dollar a day to care for themselves and their children.

The world’s most famous example of microfinance, the Grameen Bank and its founder, Muhammad Yunus, won the 2006 Nobel Peace Prize. The Bangladeshi bank now employs 16,000 people and has more than seven million clients, most of them women.

Almost one billion people, one-sixth of humanity, subsist on less than a dollar a day and are largely invisible in the markets. And yet they can be recipients of market benefits through socially responsible investing in microcredit RRSPs.

Currently, there is an immense microfinance "funding gap" of at least $250 billion, according to Deutsche Bank. Only about four per cent of the worldwide demand for microfinance is being met. Private investment, not governments, will provide most of the required funding.

Investing your RRSP funds in these ethical funds can help meet the need for new funds and make a significant impact on global poverty. Typically, each $1,000 invested for a year creates five jobs for people in poor villages around the world. Microcredit programs in the developing world fund a huge variety of small businesses – from raising chickens to renting out cell phones – that provide self-employment for people who wouldn’t normally have access to credit. Repayment rates are 98 per cent or better.

These small loans of $50 to $200, practically payday loans for people in Canada, provide hope and opportunity for the world’s poorest, who often lack the most basic resources to help them enter the world economy. We can help bridge the funding gap through investing in microcredit, and by pushing our banks and investment funds to create opportunities for investors to support microfinance.

In Canada, Citizens Bank provides a global microcredit investment product, the "Shared World" term deposit ( www.citizensbank.ca/sharedworld). All funds deposited are sent to support microfinance operations in developing countries. Among credit unions, VanCity also offers a similar product ( www.vancity.com/sharedworld), though it is only available to B.C. residents. Other organizations, such as Oikocredit ( www.oikocredit.org/sa/bc) and Kiva, ( www.kiva.org) offer Canadians ways to invest non-RRSP funds to support microcredit.

Web-based Kiva, reportedly the fastest growing non-profit in history, has funded more than 26,000 loans around the world, with a 99.8 per cent repayment rate. The Kiva website allows investors to lend to specific entrepreneurs in $25 increments and monitor their progress along the way.

Canada’s six big banks are among those conspicuously missing from the picture, as are all the major investment funds. None of these offers a way for their millions of customers to invest their savings in microfinance for the world’s poor. They might change their minds if enough of their RRSP holders announce that they intend to transfer their funds to institutions which offer global microcredit investment products.

Wise investment managers would do well to know their customers and develop investment packages that meet all their needs, including the need to do good. We don’t likely think of ourselves as international financiers with our hard-earned RRSPs. But then, the borrowers in Grameen Bank didn’t set out to be Nobel Peace Prize winners either.

In these capricious times in the world’s financial markets, we should re-examine the basis of our investments. Together, we can change the world for a billion of the poorest people, one small loan at a time.

Blaise Salmon of Victoria is president of RESULTS Canada, a grassroots citizens group advocating for basic human needs for the world’s poorest people. Alec Soucy is an assistant professor at Saint Mary’s University and helped to organize Muhammad Yunus’ public lecture at Saint Mary’s in Halifax in 2006.