How does Shared Interest assist South Africans of color?

Shared Interest provides low-income South Africans of color with access to credit and technical support to launch black small businesses, create jobs and build secure new communities. Shared Interest borrows money in the U.S. to build its fund to guarantee loans for South Africa’s township and rural borrowers and their budding financial institutions.

How is the guarantee fund used?

As a pool of money that secures South African bank loans, Shared Interest’s guarantee fund is used to move the country’s major banks to extend credit to communities and institutions they would otherwise consider too costly or too risky to serve. With the help of Thembani’s technical assistance and monitoring, Shared Interest partially guarantees mainstream bank loans to community development financial institutions (such as microfinance institutions) that lend to low-income people of color. Shared Interest guarantees also back bank loans to black-owned cooperatives and other small and growing businesses. Frequently the guarantee convinces a bank that its new borrower is credit-worthy, enabling that organization to obtain future credit without a guarantee.

Who benefits from Shared Interest's guarantees?

1. Low-income black South Africans, the majority of them women who were prohibited from doing business outside of their racially prescribed areas under apartheid and who continue to remain officially unemployed.
2. Emerging South African community development financial institutions serving low-income communities. These institutions are similar to community development loan funds and credit unions in the United States. They are most often emerging institutions that require additional capital to enhance and expand their services, allowing them to become increasingly self-sufficient.
3. Cooperatives and other small and growing businesses owned and operated by South Africans of color – primarily in rural areas.
4. South African financial institutions that connect to the majority market and learn to lend to them

Is Shared Interest successful?

Shared Interest's guarantee fund currently stands at $12 million. Since its inception, Shared Interest has helped South Africans create more than 105,000 new small businesses, 1.7 million jobs and 120,000 safe affordable homes. For every $1 in guarantees Shared Interest has issued, more than $6 to low-income South Africans.

What are some of the tangible results?

• Having established his reputation as a contractor with a Shared Interest-guaranteed loan to build 40 homes, Nicodemus Phori secured a provincial government contract to build 300 houses near Lydenberg.
• The Small Enterprise Foundation has increased its number of microfinance contributions from 18,000 to 67,000
• In collaboration with the Home Loan Guarantee Company, Shared Interest has helped to facilitate a program that provides both credit and care to low-income homebuyers with HIV/AIDS.

What is Shared Interest's own repayment record?

Since Shared Interest began, none of its lenders has lost any interest or principal as a result of a loan to the organization.

How does Shared Interest protect its lenders’ capital?

1. Shared Interest requires that other parties to its guarantees (the lending and borrowing institutions) also take a share of the risk of any given guarantee.
2. At the same time, it maintains a reserve fund for the purpose of protecting its own lenders from losses that might occur as the result of a default in South Africa. Shared Interest maintains this reserve fund at the level of at least 5% of its outstanding guarantees. However, it increases the level of coverage in response to risk ratings that Thembani conducts and reports quarterly on outstanding guarantees. Should a potential guarantee require protection that exceeds the level Shared Interest is able to provide, the guarantee is not issued. In the event that the Shared Interest reserve fund is exhausted, Shared Interest will draw on a pool of subordinated loans before utilizing investors’ principal. The layer of  risk protection includes a $3 million subordinated debt facility issued by the Overseas Private Investment Corporation (OPIC).

OPIC’s $3 million facility provides additional protection for investors in the event that the fund is depleted

What are the minimum amounts and term for loans to Shared Interest?

Loans to back Shared Interest’s guarantees begin at $3,000, and mature at least three years after they are received. (There are no maximums.) Investors can also place funds (at a minimum of $20) by visiting www.microplace.com. For more information, or to receive a copy of the organization’s confidential private offering memorandum, please contact Shared Interest by email at info@sharedinterest.org or by phone at 212-337-8547.
Investors may make smaller loans electronically by visiting www.microplace.com.

Where does Shared Interest get its money for the guarantee fund?

People just like you lend money to Shared Interest. The money is invested and remains in a designated Shared Interest account in the United States. The securities in the account serve as collateral for South African bank loans to low-income borrowers, their institutions and communities. At the same time, the securities earn interest. Twice a year, lenders receive interest payments from their loans to Shared Interest. They are invited to donate a portion of this interest back to the organization to help cover the costs of providing technical assistance and managing risk in South Africa.

How does Shared Interest pay for the cost of running the guarantee fund and providing technical assistance in South Africa?

Shared Interest covers the cost of its guarantee fund with the portion of earned interest that investors donate back to the organization. It covers the cost of technical support to South African borrowers and financial institutions in two ways. While investors are invited to donate back a portion of the interest earned by investments in the guarantee fund, individuals, foundations, and corporations also donate money outright to support the work.

How can I help Shared Interest and South Africa’s people?

You can

1. Learn more and help educate your community about the challenges and opportunities in South Africa,
2. Join a Shared Interest delegation to South Africa,
3. Participate in Shared Interest in your area,
4. Invest in Shared Interest’s guarantee fund, and
5. Donate to Shared Interest and its programs.

Can I visit Shared Interest projects in South Africa?

Yes! Every two years Shared Interest takes a delegation to visit the partners, businesses and communities that have benefited from Shared Interest’s guarantees. Contact us to learn more about the next scheduled trip.

Why is South Africa important?

Since 1994, South Africa has undergone a tremendously successful process of democratization – focusing on economic stability and human rights – and serving as a model of peaceful transformation for the world.  Prior to 1994, black people were prohibited from living, owning land or operating businesses in “white” areas.  Millions were forcibly removed from areas whites sought to restrict for their own use and relocated to economically and environmentally unsustainable settlements. In fact, 87 percent of South Africa’s population was relegated to 13 percent of the country’s land -- the most unproductive and undesirable land in the country. Black South Africans were further denied the right to own land beyond their designated traditional “homelands” and barred from operating businesses outside these areas.

Since apartheid was abolished in 1994, South Africa has enshrined both social and economic rights in its constitution. The democratic government has sought to address the country’s stark economic disparities by a variety of proactive policies and programs. These include initiatives encouraging black South Africans to start their own businesses, subsidies for low-cost housing and public facilities in township and rural areas, and the provision of land to some low-income communities through a complex process of land restitution. Despite these efforts, the unemployment rate (officially 25 percent) has been estimated to approach 35 percent, if people too discouraged to seek work are also counted. An estimated 2.1 million families are still in need of adequate housing. Today, South Africa’s banks still fail to serve nearly half of the country’s potential customers. Supporting economic human rights in South Africa is essential not only for the success of South Africa’s democracy, but for the country’s stability and that of its neighbors.

As South Africa develops strategies to address deeply entrenched inequalities from the perspective of human rights, it can provide important lessons in the economics of reconciliation and equitable reconstruction for its supporters in the U.S. and around the world.

How is Shared Interest’s Charities Navigator rating formulated?

Charities Navigator is an independent evaluator of charities that rates the financial activities of nonprofit organizations in the United States. A charity watchdog is welcome and necessary, but the organization’s methodology uses a broad approach that does not reflect Shared Interest’s mission as a social investment fund.

Shared Interest is a social investment fund that accepts both donations and investment funds. The Charities Navigator tracks only the donations raised by Shared Interest, failing to include new investment capital that we raise. As a result, the Charities Navigator rating for our fundraising efficiency does not reflect the fact that our fundraising activities generated investment capital that exceeded our charitable contributions. Secondly, the rating does not take into account the funds raised for grants that went directly to our partner organizations in South Africa (more than 20 percent of Shared Interest’s budget) or the value of the services we contributed to assist them in their fundraising efforts.

In sum, Charities Navigator’s approach to rating charities does not accurately reflect the efficiency of our fundraising or our organization.