‘Profit for purpose’ company REAL Impact has announced it has signed on as a regional partner in the Pacific of pioneering crowd-funding platform Kiva, with its first loan in Papua New Guinea approved last week. The partnership will facilitate zero-interest loans up to US$50,000 to Small Medium Enterprises (SMEs) in Papua New Guinea and the Solomon Islands creative industries.
The first of its kind in PNG, the Kiva microfinance loan valued at US$15,250 was crowd funded for Cathy Wariapa from the remote Ialibu District, Southern Highland Province in less than 14 hours. Cathy Wariapa, founder of handicraft business, SME Cwakama Arts & Crafts, will use capital to develop new products using the traditional skills of the Ialibu weavers from her community. It is the first SME to be accelerated by REAL Impact to meet minimum business requirements as part of its ‘Considered Acceleration’ program.
Virginia Bruce, CEO and Founder of REAL Impact, says, “Investment in the Pacific region is already difficult because of its isolation, small populations, and because its SMEs have no real ecosystem to support and mentor them to the stage of being investment ready.
“This partnership with Kiva is groundbreaking as it has the potential to underpin the development of an SME pipeline of businesses by providing them with working capital that in turn will develop an economic network in this informal community sector, which up until now has not been achieved.”
Globally, the Artisan Market is the second largest employer in emerging economies behind agriculture with an estimated market size of $38B. Artisans are major contributors to the world’s high-end fashion, textile and homeware industry.
REAL Impact utilises a holistic Minimum Viable Business (MVB) model that provides investment and management to Pacific Island SMEs that meet minimum business requirements in order to prepare them for capital investment and assist the development of informal economies. Operating through a social impact lens, REAL Impact facilitates sustainable connections between the extraordinary artisan skills of informal economies and the global creative industries of fashion and interiors.
REAL Impact is committed to preparing a minimum of four SMEs for investment thanks to initial funding from Australian Government with its Pacific RISE initiative, designed to facilitate a social impact investment market in the Pacific. This latest partnership with Kiva will provide all-important working capital investment into these SMEs in the creative industry as soon as they are ready for market, which is anticipated to be within the next six months.
Trade & Investment Commissioner, Pacific Trade Invest Australia, Caleb Jarvis says that the creative industries in the Pacific nations are an under-utilised asset. “They have substantial economic potential, yet there are many inherent challenges that are impeding that development, one of which is market preparedness and capital investment. This partnership is an important first step in establishing a viable supply chain that will enable these small nations to deliver to international markets.”
Since launching in 2005, not-for-profit pioneer Kiva has facilitated more than $1.2 billion in loans to low-income individuals around the world, with more than 2.4 million of its 3 million borrowers women. Kiva works on a crowdfunding model, which allows users throughout the world to connect with organisations that provide small, low-risk loans to in-need individuals or groups in developing countries.
Kiva Investment Manager Mark McDonagh says, “At Kiva, we are committed to addressing the challenge of financial exclusion wherever it exists in the world. Through our crowdfunding platform, we are able to offer a unique form of risk-tolerant capital that REAL Impact will use to finance and scale promising businesses in the Pacific region. These businesses rarely have alternative options for accessing loans and we believe our partnership with REAL Impact has the potential to transform how traditional investors view the region.”
“REAL Impact has facilitated the first Kiva loan in Papua New Guinea to Cathy Wariapa, which was crowdfunded in less than 14 hours, a result that speaks to how much our lenders value the impact of a loan such as this,” Mark McDonagh adds.
According to the World Bank Findex database, 1.7 billion people globally are “unbanked” – where they are without an account at a financial institution or through a mobile money provider. East Asia and the Pacific region are home to almost one quarter of the world’s unbanked.
“While microfinance is available in the Pacific region, the interest rate can be up to 25%, which is prohibitive for SMEs. The ‘informal’ sectors like the Pacific region have little to no access to any basic financial programs and are effectively excluded from the financial system, with unmet needs and untapped market potential. One of the major reasons why people within the Pacific are unbanked is due to the difficulty in getting even a basic national identity,” Virginia Bruce says.
“REAL Impact is working to create a global value chain for the Pacific’s SMEs by filling in gaps to stabilise production and build a viable business structure that will have an inclusive social and economic impact on the SME and its community, and this will have ripple effect on the population as a whole,” she adds.
“Globally, we have a long way to go when it comes to improving access to capital for SMEs and MSMEs in the Pacific. Generating financial inclusion will be a key enabler to lifting developing populations out of poverty as well as creating viable economies that meet the needs of people in a responsible and sustainable way. The partnership with Kiva is the first critical step in making this happen for the Pacific region,” says Bruce