As impact investors, we need to be careful at some of unwanted but serious consequences of our investments that can go fully against the initial intentions.
Take investing in Microfinance for instance. The social bottom line is financial inclusion, i.e helping undeserved segment get access to better financial services including credit. If, as investors, we keep pushing money in saturated markets, then the underlying MFIs will keep deploying credit, probably lending in less stringent and careful ways. Clients get over-indebted, default on their loans, and as a result are black listed by all financial institutions.
The result? Instead of including them, we indirectly help exclude them. Instead of providing financial services to a larger segment, we help excluding a substantial percentage. In times of crisis, investors rush to restructure their loans and to estimate the write-offs. However, we tend to forget who stand behind those write-offs :thousands of stressed and low income people who will now be excluded for years. Maybe, such dimension should be added to how we measure the social impact and how we define social metrics.
Maybe we should add “people unintentionally excluded” in our impact measurement framework. This will help us not only be more accurate about our mixed results, but also take credit for the good impact as well as the damaging one. Your thoughts are welcome.