A new investment fund that aims to deliver capital to South Africa's most economically depressed communities was launched Oct. 26.
The launch of the Thembani International Guarantee Fund was announced jointly by former New York City Mayor David N. Dinkins and Franklin Sonn, South African ambassador to the United States.
The fund is actually a joint venture between its U.S. sponsor, Shared Interest, and a Swiss development organization called RAFAD, Research and Applications of Alternative Finance for Development.
Shared Interest will raise money in the United States, while RAFAD will raise money in Europe.
The money raised, expected to total $10 million over five years, will guarantee loans issued by South African banks to community development institutions for very small business and housing loans.
The guarantees will enable community development financial institutions to borrow from South African banks and, in turn, extend loans to low-income borrowers the banks traditionally have considered too risky or too costly to serve.
The assets will be invested in the United States in deposits in community banks and U.S. government securities.
Investors will get a below-market return of about 3% a year, according to Donna Katzin, executive director.
"We will be looking for investors who prioritize social impact over rate of return," she explained.
The likely candidates for investment in the fund: religious organizations, foundations, individuals and perhaps some corporations, she said.
Shared Interest was developed one year ago by the FREESA Development Fund for South Africa, a fund created by South Africans in exile in Boston. The development fund has been providing grants and technical assistance for community development and human rights work in South Africa since 1985.
