What Is Social Impact Investing?
Investors make social impact investments to foster positive social and environmental change while generating financial returns.
As a form of investment, it has grown in popularity in recent years. It’s a way of helping to address many of the world’s biggest challenges in sectors such as renewable energy, agriculture and conservation. But it also helps to resolve many of society’s everyday challenges around issues such as housing, healthcare and education.
How and where did it start?
The term “social impact investing”, also known as impact investing, is believed to have been coined in 2007. Yet its roots extend further back into the 20th century. The idea is to use money and investment capital to drive positive social results.
The majority of the money put towards impact investments comes from large, institutional investors. These are hedge funds, private foundations, banks, pension funds and other fund managers. However, thanks to a new breed of socially motivated financial services companies and the new digital, investment platforms they have created, retail investors are now able to put their money towards good causes too.
These platforms empower investors to comprehend where their money goes, ensuring their investments contribute to positive causes.
How does education finance fit in?
One of the ways this can be done is through education finance and platforms such as Lendwise. This is a unique sector that enables individual borrowers to achieve their academic and career aspirations while also increasing their probability of higher future income. This is reassuring for investors as they know their money is having a positive social impact. While also increasing the potential to grow their money.
Traditional high street banks consistently rejected and provided poor service to individuals seeking to borrow money for higher education. Lendwise founded to help bridge this unequal gap.
Unlike other lenders, we can offer loans at competitive rates to allow them to enhance their skills and education. Our flexible loan terms also mean that borrowers don’t have to start repaying their loans until after they have completed their full-time studies.
Why should I invest in education finance now?
If you are a prospective investor who is new to social impact investing or wishing to further diversify your portfolio then now is a good time to consider education finance.
The uncertain economic climate has accelerated higher education applications over the past 12 months as students recognise the value of pursuing postgraduate qualifications in an increasingly competitive graduate market.
Unfortunately, government-backed finance, in the form of the Postgraduate Mater’s Loan, isn’t always enough to support students through the process. Not everyone is eligible for the loan. Those who are find the loan not sufficient to cover the cost of their course and their living costs.
Traditionally, many postgraduate students have supplemented their income by working part-time. These sectors typically involve hospitality or retail, both of which the pandemic has badly affected. It means that now more than ever, a lot of students need additional support from private lenders, which is where you can help.
Investors are currently achieving estimated returns of approximately 8% a year from a diversified pool of loans, with investments in individual loans going up to 10% a year. Find a summary snapshot of our loan performance here.
With all of this in mind, the argument for social impact investing and education finance could perhaps never be greater.
*** Important Note ***
As with all peer-to-peer loans, our products place capital at risk.
Investors may not get back the full amount they lend and/ or the interest they expect. Loans are made to individuals over a period of up to 10 years and as such, loans can be illiquid. The tax treatment of interest and reliefs on defaults may be subject to change and tax treatment will depend on individual circumstances. Any reference made to past performance or forecasted performance of interest rates is not a reliable indicator of future performance. Lendwise Ltd, trading as Lendwise, does not provide investment or tax advice, and information included in this document should not be construed as such. We recommend that investors considering investing in peer-to-peer loans take independent financial advice.