CNBC was taking a survey this morning to see if viewers felt the world was plunging into a global Depression. Since 2008 we have heard about a Recession, the “Great” Recession, a “Double-Dip” recession and now the word “Depression” is being thrown around the airwaves. The History Channel has been giving an awful lot of airtime to “The Nostradamus Effect” and other titles of shows using the word “Armageddon.” Ok, we get it. End of the world, global economic meltdown… the sky is falling… we get it.
Banks in Europe are on the verge of collapse, banks in America are taking it on the chin and our own Treasury debt has been downgraded from its historic and never-been-changed AAA rating. Greek default, Spain, Italy… the developed world is not looking so hot right about now. So with credit card defaults approaching 10%, the price of gold skyrocketing and then plunging and skyrocketing again, home foreclosures through the roof… is there anywhere safe to put your money? How about the mattress? Nope… what if your house catches fire? Okay, that’s enough sour grapes for this commentary. Now on to the good news.
The best way to analyze any kind of investment is to view its success rate over a long period of time. The US has never defaulted on its debt i.e. it must be the safest investment in the world, right? At this moment, take a look at this investment idea: Over 35 years, this debt asset class has a default rate of less than 2% with better than average fixed income returns. Its corresponding equity asset class is seeing its average annual returns exceed 20%. What is this iron-clad solid investment? The global poor. Microfinance business loans to the world’s working poor is skyrocketing as lenders and even major investment banks like JP Morgan, Deutsche Bank and Citi want to stabilize their lending portfolios by lending via microloans to people who traditionally pay these loans back like clockwork… the world’s poorest of the poor.
Half of the world’s population lives on less than $2 a day. About 150 million people around the world are current microfinance clients while about 1.1 billion want a loan AND HAVE THE ABILITY TO PAY THE LOAN BACK. Demand for loans is 10x the current supply. But the idea of lending to the poor still seems strange and therefore risky. The clients repay their loans because they want another loan and they work harder than anyone I have ever seen- bar none. They have families to feed, kids to put through school and don’t understand the concept of “default” or “going bankrupt.” They pay their loans back… period.
As global banking continues it’s metamorphosis to stay afloat, the winners will be the ones who see the world’s poor not as a risky and pitiful place to assign capital but as the safest bet of all. Change the world and help the poor… and have a better bank and organization for doing it. This is no longer charity… Microfinance may very well be a powerful cog to help get the global economy moving again.
If you have money on the sidelines and are cynical about the current financial markets or simply want to diversify your portfolio, give us a call. And if you want to help the poor while realizing investment returns... contact us right away!
Mark Robeson
President
Global Microfinance Partners, LLC
Tel +1 704 332-9390
mark@globalmicrofinancepartners.com
www.globalmicrofinancepartners.com
“Connecting Capital Markets with Village Markets”
Friday, September 23, 2011
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