24 Sep Shared Interest Fund
Interview with Martha Brantley, Director of Strategic Partnerships for the Shared Interest Fund
When I learned about the approach that Shared Interest took in leveraging deposits in United States banks to back loans on the continent of Africa, I felt sure that Swift Foundation would be interested in their workforce development and social justice fund. The leadership at Shared Interest has a long-standing commitment to the people of Southern Africa, and they mobilize investor loans, protected by a layer of philanthropic reserves, to unleash local capital for the unbanked and under-financed to engage in productive businesses.
Jen: How was the Shared Interest Fund created?
Martha: Shared Interest was founded in 1994, by leaders of the anti-apartheid and socially responsible investing movements. After divesting from South Africa helped bring about the end of apartheid, these investors were now ready to reinvest in the young democracy, to help further the cause of economic justice. Shared Interest was formed to help make the region’s plentiful commercial capital available to the majority of its residents: low income, Black Africans.
Jen: How are your investment funds catalytic in a way that is different from other funds?
Martha: Unlike other investors, who are lending US dollars to African businesses, Shared Interest is moving Southern Africa’s own banks to extend credit to marginalized entrepreneurs and farmers in their own countries. By helping businesses build relationships with local, national, and regional lenders, we are contributing to the development of sustainable local financial systems that are not dependent on international capital for development. Borrowing in local currency is also much safer for many small businesses, especially given the fluctuations in exchange rates common across Southern Africa.
Jen: How do you describe the kind of non-financial returns the fund offers?
Martha: Our guarantees impact livelihoods: they help create jobs, increase incomes, and support micro-enterprises across Southern Africa. We also focus on gender and climate: many of our borrowers, their employees, and/or customers are women, and we frequently finance projects that help communities adapt to, or mitigate the impact of climate change. Also important, but more difficult to quantify, is the effect of our work on the behavior of mainstream financial institutions and markets, and the corresponding increase in financial inclusion and improvement in access to capital.
Jen: Can you describe how you use integrated capital to do your work?
Martha: Our work combines multiple layers of financial capital, along with technical assistance provided to borrowers, to strengthen their business and their ability to secure financing and manage credit. Types of financial capital we use include the fully commercial bank debt borrowed by our beneficiaries and secured by our loan guarantees; the guarantee itself, which takes the form of a letter of credit; the concessionary debt that we borrow from socially responsible investors to use as collateral; and philanthropic capital, which we use both as loan loss reserves and to fund technical assistance. This TA, which is provided by Shared Interest and a range of local partners, not only helps our borrowers build financial, managerial, and operational skills but also builds social capital, especially within cooperatives and other borrowing groups.
Jen: What is transformational about the businesses that you invest in?
Martha: We invest in marginalized people that are creating and helping transfer wealth to Black hands – and, in the process, creating prioritized services and jobs for their communities. In economies that are among the most unequal in the world, with most of the population living below the poverty line, directing resources, power, and opportunity to these entrepreneurs and businesses is transformational. Similarly, the fact that we equip our borrowers to secure credit on their own in the future — first with and then without guarantees – is transformational in the context of financial systems that have principally existed to serve corporate clients.
Jen: How do you address racial justice, income inequality, and/or gender justice through your products and services?
Martha: Shared Interest helps provide capital to Black borrowers, overcoming the structural biases they face when interacting with the mainstream financial system. We focus on businesses that create a positive economic impact in low income communities, and we work to strengthen collective ownership strategies, helping to increase the power of poor and marginalized individuals and communities. We also prioritize loans to women borrowers, as well as businesses that employ or are supplied by women, and we provide special support to help them overcome the unique challenges they face in dealing with lenders.
Jen: What does a foundation or investor need to understand in order to invest in transformational businesses?
Martha: It helps to understand the timeline for transformation – it doesn’t take place on a predetermined path, and it takes time to have a meaningful impact on a thorny problem. Also, transformational solutions are generally developed by those closest to the problem, and investors need to remember that the judgment of local leaders and frontline communities is generally better than our own in determining what resources are needed to address a particular issue or situation.
Jen: What do you tell people who think your fund is risky?
Martha: In 26 years, no investor in our fund has ever lost a cent of interest or principal! This track record exists because of the many approaches we use to mitigate risk, from strong local partnerships to manage the risk of default, to robust loan loss reserves that protect our investors’ capital. It is also important to think about other types of risk, for example, the risk that an investment will do harm or fail to meet its impact goals. Investors in Shared Interest are significantly less exposed to those risks.
Investment Thesis/What is your rationale for your approach to investing? Shared Interest uses guarantees to mobilize Southern African financial institutions to extend credit to “unbankable” Black borrowers, giving them the capital and skills to invest in sustainable livelihoods and build inclusive economies.
Geography: Southern Africa
Year Founded: 1994
# of Investments: 88
# of Investors: 336
Funds Raised: $30,122,822
What’s on Martha’s Minds?
Book: How the Word Is Passed: A Reckoning With the History of Slavery Across America, Clint Smith
Song: Louisiana 1927
Podcast: Ear Hustle