Beyond grants: Leading private foundations for development finance

Private philanthropic foundations, and their role in development finance, have captured a lot of headlines and column inches in recent times — but non-grantmaking foundations and the opportunities they provide for partnerships can sometimes be overlooked. In a bid to redress that, Devex dug into the data to reveal the private foundations providing the most development finance beyond grantmaking — and there’s one that comes out miles ahead. Non-grantmaking activities mainly comprise loans and reimbursable grants, and increasingly in some cases pay-for-results mechanisms like development impact bonds. More than 30 major private foundations reported data to the Organisation for Economic Co-operation and Development in 2019. That data shows a total $8.8 billion of philanthropic disbursements for development between 2018 and 2019, of which 16% was non-grant financing. That 16% is mostly accounted for by two organizations: the BBVA Microfinance Foundation and the Grameen Crédit Agricole Foundation. Together, they disbursed over $1.4 billion for development projects in 2019 — with the BBVA Microfinance Foundation accounting for the vast majority of that sum. BBVA Microfinance Foundation Headquarters: Madrid, Spain Founding Year: 2007 Financials (2019): $1.3 billion was disbursed for development outcomes according to the OECD Geographical Focus: Colombia, Chile, Dominican Republic, Panama, and Peru Focus areas: Financial inclusion, microfinance, and productive finance According to the OECD, BBVAMF is second only to the Bill & Melinda Gates Foundation in terms of the amount of philanthropic funding it provides for development. The foundation operates on the belief that microfinance can drive economic inclusion and reduce poverty. Since its founding in 2007, it says it has supported up to five million entrepreneurs with more than $15.5 billion in total. Although it was originally established as part of BBVA’s Corporate Social Responsibility, it works independently from its parent company. BBVAMF offers financial products and services such as loans, training, and financial education through its six institutions, located in the five countries where it operates: Fondo Esperanza and Emprende Microfinanzas in Chile, Bancamía in Colombia, Banco Adopem in the Dominican Republic, Microserfin in Panama, and Financiera Confianza in Peru. BBVAMF puts a particular emphasis on supporting female entrepreneurs. The OECD data suggests it was the top philanthropic contributor to gender equality initiatives from 2018 to 2019, investing $595 million to support women-led small businesses in Latin America. It also partners with international organizations such as the Inter-American Development Bank and the International Finance Corporation to promote microfinance projects, and it works with UN Women to ensure the initiatives can benefit women and girls in the region, many of whom do not have access to financial services and face economic obstacles when it comes to growing their businesses. Its 2019 sustainability report states that 58% of its clients were women. Grameen Crédit Agricole Foundation Headquarters: Luxembourg, with offices in Mountrouge, France Founding Year: 2008 Financials (2019): $47.192 million was disbursed for development outcomes according to the OECD Geographical Focus: 39 countries across Africa, Asia, and central and eastern Europe Focus areas: Microfinance, social entrepreneurship, agribusiness, and financial inclusion The foundation was created as a partnership between financial services company Crédit Agricole and Muhammad Yunus, founder of the Grameen Bank and 2006 Nobel laureate. Their aim is to develop rural economies and foster inclusive finance by prioritizing microfinance institutions that cater to women and people in rural areas — groups that respectively comprise 87% and 83%, respectively, of the foundation’s 7.3 million reported beneficiaries. The foundation aims to provide loans and guarantees to microfinance institutions with sustainable business models. Due to the COVID-19 pandemic, it will also strengthen its technical assistance offering to support the operations of recipient organizations. Additionally, it provides advisory services to investment funds. Those wanting to make use of its services can submit an application online. The foundation is a separate entity to Crédit Agricole but is part-funded by the bank — which provided the initial €50 million endowment — and bank employees can volunteer their technical expertise with organizations supported by the foundation. As of January, the foundation’s portfolio was worth $82.5 million. Among the latest publicly available contributions to the bank are a €10 million guarantee from Agence Française de Développement for a renewed African Facility partnership, and a new €5 million loan from Proparco. Other key foundation supporters are Amundi, the European Investment Bank, Crédit Agricole CIB — the investment arm of Crédit Agricole — and the Swedish International Development Cooperation Agency. Among its most recent operations, the foundation became an impact investor in the Smallholder Safety Net Upscaling Program and provided a €3 million loan to Pahal Financial Services Private Limited, an India-based microfinance institution, to support its borrowers after the COVID-19 pandemic. Other foundations providing development financing beyond grantmaking The B&MGF invested 0.2% of the $4 billion it spent on development in non-grant financing in 2018. The main channel was its Strategic Investment Fund, offering direct equity investments, fund investments, loans and credit enhancements, and volume guarantees. The Michael & Susan Dell Foundation provided an even bigger portion of its financing outside of grants, through program-related investments, equity, convertible instruments, debt, impact bonds, and guarantees. This amounted to 38.1% of the $31.4 million it provided for development in 2018. Try out Devex Pro Funding today with a free 5-day trial, and explore funding opportunities from over 850+ sources in addition to our analysis and news content.