Catalytic capital – philanthropic and risk-bearing investments aiming to attract more mainstream investors – can take a variety of forms, generally aiming to reduce risk while a market or strategy is proven. Such capital tends to be scarce. So we have been intrigued by a fund model where philanthropic guarantees outstrip traditional investment capital 2:1. In this model, guarantees are pooled at the portfolio level with no assets transferred unless a portfolio loan defaults, at which point losses are shared pro rata across the guarantee holders (most of which treat the loss as a charitable contribution).
MCE Social Capital (MCE), an international nonprofit impact investing firm, has developed and deployed such a model. Since 2005, MCE has lent almost $200 million to over 120 institutions in 45+ countries with a 2% default rate.
In this webinar, we examine MCE's model and discuss the successes and challenges they have faced in working with risk-tolerant capital and how they have balanced risk and returns among their capital holders and portfolio companies. Catherine Covington of MCE describes this unique funding model and Aner Ben-Ami of Candide Group reflects on why they have supported a client to become both an investor and guarantor in MCE.
