Origen Private Equity Ltd., a boutique investment firm headquartered in London, is launching in June what is set to be the first impact investment fund developing low-cost housing in north-east Brazil in conjunction with the Brazilian government's Minha Casa Minha Vida programme.
A survey conducted by JP Morgan last year identified over 100 unique debt and equity investments – not including microfinance – as impact investments. In India, impact investors already provide services and products to low-income earners worth an estimated US$400 million.
Origen Private Equity Ltd. is hoping to raise approximately US$80 million by year-end for a range of low-cost housing developments in and around Natal which will qualify for financial support under the Brazilian government's Minha Casa Minha Vida (My House My Life) programme.
Natal is a booming port city of some 800,000 people in north-east Brazil which has been selected as one of the twelve host cities of the 2014 football World Cup finals.
“We are very confident that there are still significant profits to be made in the property market in Brazil,” says David Palumbo, director of Origen Private Equity Ltd. “Impact investing can deliver high, consistent returns to investors and at the same time have a positive and measurable social impact.
We believe that if we treat the poorest groups in society as customers instead of vulnerable individuals needing charity, we can help them move from slums into well-planned communities. This gives them a sense of belonging as well as a sense of dignity,” says Palumbo.
Minha Casa Minha Vida started in April 2009. The programme provides finance for a million new homes which will ultimately cut the country’s housing shortfall by 14%. Of this total, 400,000 units are earmarked for the poorest sections of Brazilian society – families earning up to three minimum wages.
In its first 18 months of operations, the programme helped 278,892 Brazilian families to become homeowners, according to a report by Brazil’s national audit authority.
“There is a massive, pent-up demand for new homes, says Palumbo. The country’s population is young and still growing. At the same time, the financial services sector in Brazil is maturing. The huge number of credit cards now in use has not only boosted GDP, it also means that about 80 million Brazilians now have bank accounts, which are essential for mortgages.”
The value of mortgages contracted by banks and credit institutions for the purpose of residential real estate in Brazil remains low – at around 3% of GDP. The equivalent figure for the UK is 80% of GDP, according to the European Mortgage Federation.
“Making money and making a difference are not only compatible, we believe they are a fundamental responsibility of capital,” says Palumbo.
By Nick Foster in Brasilia