CELEBRATING 30 YEARS OF GLOBAL PARTNERSHIPS

Investing to Alleviate Global Poverty

Three decades ago, when Bill and Paula Clapp launched Global Partnerships to provide small loans to street vendors in El Salvador, they were inspired by important new ideas about the power of microcredit to improve the lives of the world’s poorest people. Our approach back then seemed straightforward: loans to microfinance organizations serving people in poverty—principally women—to start small businesses so they could increase household income and help raise their families out of poverty.

The world has changed dramatically since then. The combination of globalization and rapid technological progress has increased living standards for hundreds of millions of people, expanded access to education, and delivered treatments for diseases once thought incurable.

But some 3.8 billion people—nearly half the world’s population—still live on just dollars a day.

The entrenched nature of global poverty in its many forms reflects deep, sustained market failure. The uncomfortable truth is that traditional capital markets, with their emphasis on short-term profits and risk-adjusted financial returns, lack the incentive to see people living on dollars a day as a potential market. And while philanthropy and the public sector play essential roles in serving this segment, they lack the resources and long-term planning horizon required to meet the need.

At Global Partnerships we see a fourth way. Through the work we began 30 years ago with our first small loans in Central America, we’ve learned that capital investment designed first and foremost to achieve the greatest impact for people living in poverty can help bridge the gap between traditional capital markets, philanthropy, and the public sectors.

Untangling the Complex Web of Poverty

Over the course of our first decade, it became more and more clear that while small loans are essential, they are not sufficient.

Consider a female microentrepreneur working in the informal economy on the outskirts of Mexico City—or in Bolivia, or Haiti, Malawi, Senegal, or any of the nearly 30 countries where our funds invest. She needs to be financially literate to understand the terms of her loan and avoid the trap of over-indebtedness. For her business to thrive, she needs business skills and market information. Seeing this led us to focus on microfinance institutions that offer loans bundled with financial training and education services.

During our first 10 years, we also made a commitment to listen to clients who receive these loans so we could gain a clearer picture of what really makes a difference in their lives. We learned from them that it is incredibly difficult for even the most successful entrepreneur to untangle her family from the web of poverty that has trapped people for generations. The fact is that for the billions of people who live on dollars a day, basic health services, affordable housing, clean water, nutritious food, and educational opportunities are unreliable, expensive and often out of reach.

The woman on the outskirts of Mexico City who received a small loan from a microfinance institution is a good example. Even when her business is thriving, her neighborhood lacks reliable transportation, energy, water and a grocery store with affordable, nutritious food. Because she spends an inordinate amount of what she earns on inadequate amounts of poor-quality food, she and her family struggle with malnutrition and chronic disease.

Understanding this made it clear that poverty isn’t simply an economic problem, but that it’s bound together with a host of complex and multilayered issues. And it helped us see that the most effective response is to invest in social enterprises that provide products and services designed to overcome the interconnected and dynamic challenges faced by people living in poverty. Whether it’s a microfinance institution, an agricultural cooperative, or a health service provider, we seek partners that design their offerings with an understanding of how gender inequality, food insecurity, lack of access to educational opportunities, and the growing effects of climate change impact their clients.

Redesigning Capital to Meet the Needs of People Living on Dollars a Day

As a result, our investment approach has evolved since the mid-2000s. We still start with the people we aim to serve, but we use research and data to understand what they want and need to improve their lives. From there, we identify social enterprises that deliver products and services that evidence makes clear meet these needs and are designed to be affordable, scalable, and adapted to local conditions.

We support these social enterprises by providing capital investment through an impact-first approach that gauges success not in returns to investors, but through the benefits that flow to those they aim to serve.

And we work in close partnership with investee social enterprises to measure and improve the real impact they enable in customers’ lives. Using data collected through mobile-phone surveys, we provide analytics and advisory support that helps social enterprises strengthen their impact. Then we recycle the invested capital so we can expand better and broader access to opportunity, for millions of people – again and again and again.

A great example is our partnership with Nilus, an early-stage social enterprise that provides affordable groceries in urban and near-urban food deserts in Mexico and Argentina. Nilus got our attention because of its innovative approach to addressing the reality that poor people typically pay more for lower quality necessities than middle class consumers, because their communities lack access to efficient distribution systems and bulk purchasing resources.

Nilus gets at this problem by purchasing less-than-perfect produce and near-expiration-date groceries in bulk from suppliers which it delivers to customers for about 25 percent less than the available alternatives. It trains community leaders, mostly women, to work as trusted agents who sign up customers and facilitate purchases and delivery.

Through direct surveys conducted in 2024 by our research partner 60 Decibels, we know that 65 percent of Nilus’ customers report spending less on groceries, 92 percent report less time spent purchasing groceries, and 85 percent report their quality of life has improved.

Nilus is not unique. We see results like this across our portfolio of investments, which span social enterprises that offer everything from loans to purchase livestock or pay school fees to preventative health screenings, agricultural training, and access to clean water, better housing, and much more. Through 60 Decibels research results, we’ve learned about the effectiveness of many of our borrowers’ efforts.In aggregate, 89 percent of surveyed clients of these social enterprises report improved quality of life, 75 percent report saving more money, 66 percent say the number and quality of the meals their family eats has increased, and 62 percent report spending more on their children’s education.

Where We Go From Here

After more than thirty years of this work, it’s clear to us that traditional capital markets aren’t serving people living on dollars a day, and philanthropy and public sector efforts alone won’t fill the gap. But when you invest in social enterprises that are engineered to serve this segment through an approach that recycles capital into new and ever-greater impact, the potential for sustainable and inclusive global development begins to come into focus.

Looking ahead, we see enormous opportunities for the kind of innovations exemplified by social enterprises like Nilus. Realizing these opportunities requires awareness of the multifaceted nature of poverty, a deep understanding of what people living on dollars a day need to improve their lives in ways that matter most to them, and an approach to capital that prioritizes impact alongside capital preservation.

These insights drive the work we do every day at Global Partnerships.

This is the second part of our 30th anniversary series, where we share reflections that guide our work today and inform the path ahead. Read the rest of the series here.