Social impact investments are made with the intention of driving positive social and environmental change, while also generating financial returns.
As a form of investment, it has grown in popularity in recent years as 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, otherwise known as simply impact investing, is thought to have been coined in 2007 but its roots stretch back much further into the 20th century.
It has taken many forms over the years but ultimately, it’s about using money and investment capital to drive positive social results.
The majority of the money put towards impact investments comes from large, institutional investors, such as 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 enable investors to have a better understanding of where their money is going and be assured their investments are being put towards 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.
One of the biggest reasons Lendwise was founded because we knew that people wishing to borrow money for higher education were being poorly served by high street banks, and this is still the case.
Unlike other lenders, we are able to offer loans at competitive rates to young graduates to give them the opportunity to enhance their skills and education. Our flexible loan terms also mean that borrowers don’t have to start repaying their loan until after they have completed their study.
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 and for those who do qualify, it may not be sufficient to cover the cost of their course and their living costs.
Traditionally, a lot of postgraduate students work part-time in sectors such as hospitality or retail to help supplement their income, but both of these have been badly affected by the pandemic. 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. A summary snapshot of how our loans are doing can be found 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 are 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.