Micro loans - Direct Investment

Some basic definitions and concepts …files_text

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What is a social business ?
It relates to any business project or activity putting their social direct and indirect impact to the
community at the forefront of their mission (the social mission should even be mentioned in the
articles of incorporation of the company).
The social approach is thus embedded in any processes of the company, be it the operations, the
decision making process, the strategic planning or the governance principles.
The social added-value from the business will be measured for instance in term of : better access
to training, education for the employees, their family and for the surrounding community ;
better conditions of living (including health) while taking care of the environment ; job creation ;
etc …
Last but not least, a large part of the financial profit from the business operations is reinvested.

What is social finance ?
It is the part of the finance industry that focusses on the investment and the delivery of usual
banking services to activities and assets generating a social impact. Such activities are also called
social business.
Social housing is a type of asset entering in the scope of social finance services.

What is the social return on investment (SROI) ?
In comparison with the financial return that measures the financial performance, the social
return aims at assessing the social performance of an investment. The social return can be
expressed in % or in units, depending what social indicators are taken into account (number of
jobs created, % of delinquency …).
What gets the social return relevant is the scope of selected data upon which it is calculated.

What is sustainable business ?
It relates to any business project or activity putting their social and environmental direct/indirect
impact throughout the world at the forefront of their mission (the concept of sustainability
should be elaborated in the articles of incorporation of the company).
The sustainable approach is embedded in any processes of the company, be it the operations,
the decision making process, the strategic planning or the governance principles.
Indicators of social and environmental impact are numerous. They include the conservation of
the natural resources as well as the gender equality.

What is sustainability ?
It is the ability of an action or a decision to generate a social / environmental direct and indirect
impact that contributes to secure human life on the long term.

What is a sustainable investment ?
It is an investment that generates a social/environmental direct and indirect impact. It we
consider investment in a very large definition, it should include philanthropic giving to
social/environmental projects, as well as debt or equity.
Sustainable investment overwhelms various terminologies such as SRI (Socially Responsible
Investment) or Impact finance. It applies to various investment products, such as mutual funds,
private equity and venture capital.

What is sustainable finance ?
Sustainable finance is the part of the finance industry that aims at investing in sustainable
activities and assets.
What qualifies a sustainable activity or business is its ability to generate social/environmental
outcomes and at the end of the day to ensure economic growth without having side-effects to
the humanity.

What is sustainable development ?
Sustainable development, is defined by the Brundtland Commission (1987) of the United Nation
as a “Development that meets the needs of the present without compromising the ability of
future generations to meet their own needs”.
The sustainability of development is a crucial question to address in order to secure the future of
the humankind.

What is direct investment ?
It is the concept of investing with keeping a steady and direct contact with the business owner
over time.
Mainstream investments are channelled through mutual funds that do not allow investors to
have a direct contact with the target. Even when investing in direct lines (listed companies), it is
hardly impossible for a small shareholder to have standing relationship with the firm except
during the AGM (Annual General Meeting).
Direct investment is specifically adapted to sustain the development of SMEs (Small and Medium
Enterprises), because a strong link between the business owner and the investor is a key
The possibility to go on site and meet the staff fuels the concept of direct investing.

What is environmental performance ?
It is the direct or indirect outcome of a business activity on the natural environment. Assessing
this impact helps understand how far an activity is compliant with the conservation of the

What is Corporate Social Responsibility (CSR) ?
The EU definition of CSR is: “A concept whereby companies integrate social and environmental
concerns in their business operations and in their interaction with their stakeholders on a
voluntary basis”. (Commission Green Paper 2001 “Promoting a European Framework for
Corporate Social Responsibility”, COM(2001)366 Final)

What is Socially Responsible Investment (SRI) ?
Many definitions of the SRI do exist. In order to qualify Social and Responsible Investment in the
PDI context, we take as a reference some features given by Domini Funds (www.domini.com) :

  • Produce high-quality, safe, and useful products
  • Contribute to the local communities in which they are located
  • Enrich the ecosystems on which they depend
  • Invest in the health and development of their employees
  • Treat their investors and lenders openly and tran
What is community development ?
It relates to any actions and policies aiming at reinforcing the cohesion and the social links within
a group of people and at sustaining their condition of living (including education) … be it a
district, a village or even a region.
Community development can be supported by the mean of local business activities that take
care of how a population is living and what it needs to survive.

What is impact finance ?
Alike sustainable finance, the concept of “impact” outlines the fact that any investment is being
monitored all along its duration with the aim to check what social/environmental outcomes it