Calvert Giving Fund
The Atlanta-Journal Constitution
July 24, 2008
Plan Turns Habitat for Humanity Into Investment:
Individuals will be able to buy stake in nonprofit's microloan program
by Chris Megerian
Habitat for Humanity is looking to grow funds by borrowing a developing-world concept: microloans.
The Atlanta-based nonprofit, which builds homes for people in need, is expected to announce Thursday the launch of a microloan program in partnership with the Maryland-based Calvert Foundation. It will allow individuals to invest in — rather than simply donate to — Habitat's philanthropic mission.
Investors can buy a stake in Habitat's microloan program for as little as $100. If the program is a success, investors eventually would receive interest payments on their money.
Microloans are typically used to provide small amounts of credit to people or businesses that do not qualify for traditional loans. The concept has become increasingly popular in the developing world, but it is a first for Habitat, which has subsisted almost entirely on donations, grants and proceeds from home sales.
"This is a relatively new phenomenon," said Habitat Chief Executive Jonathan Reckford.
He said the Calvert partnership, which will last five years, is one new way to fuel the growth of Habitat, which almost doubled the number of projects it completed from 2005 to 2007. Last year, it finished 49,000 home projects worldwide.
"With the huge need for decent, affordable housing in the world, we want to continue that explosive growth," he said. "One of the things that's appealing about this program is that it's an affordable program for small investors."
Calvert has been providing microloans for the past 12 years, and it currently has $153 million in outstanding loans with more than 240 organizations around the world.
Calvert Foundation President and CEO Shari Berenbach said she hopes the Habitat program will attract $10 million — enough money for 400 houses — through microloan investments in the first two years.
The program works as a sort of financial relay race, with money changing hands at least six times on its journey from the investor to the work site and back again.
Individuals can purchase notes through their brokers, directly through Calvert, or online at MicroPlace, an Internet-based microfinance company owned by San Jose, Calif.-based auction site eBay.
Calvert will loan the cost of the note to Habitat for Humanity International, which then loans the money to one of its 2,300 affiliates in the United States and overseas. The money is used for construction and is repaid when the house is sold.
The money then works its way back through the chain.
Calvert gets 1.5 percent interest on the loan to cover administrative costs, and the investor receives up to 2 percent interest.
The program is similar to one Habitat started in 1996, in which it borrows money from Wall Street investors and then lends it to affiliates. That program has generated $74 million in loans but does not target small investors like Calvert's microloan program does.
Habitat, which was founded in Americus and moved its headquarters to Atlanta in 2006, has built more than 250,000 homes worldwide since it began in 1976.
"Habitat has such broad recognition in the public marketplace, we think it's going to bring in a lot of people who have never thought about using investment to change the world," Berenbach said.
Habitat's fund-raising totaled $1.2 billion in fiscal year 2007, which ended June 30, 2007.
Berenbach said the program with Calvert aims to promote sustainable growth through repeated infusions of cash from the same investors.
More than 90 percent of the microloan money currently invested through Calvert is reinvested when the loan ends, she said.
That's one of the major strengths of microfinance, which has gained popularity and acclaim in recent decades. Two years ago, the Nobel Peace Prize was awarded to Muhammad Yunus, the founder of Grameen Bank, which got its start in the late 1970s providing credit to the poor in Bangledesh.
Tracey Turner, the founder of MicroPlace, said microfinance has generated a lot of interest in the United States because it resonates with the American ideal of giving a hand up instead of a hand out. She said microfinance has been successful in situations where large banks historically declined to provide loans.
"They didn't see any reason to serve the 4 billion lower-income people in the world," she said. "That's the gap that microfinance stepped in to fill."
