Developmental Lending

Developmental lending (DL) is a straightforward and familiar form of social finance. DL involves making loans to people and organizations who cannot get financing at a bank or credit union. The three keys to developmental lending involve specialized risk assessment, steps to ensure payback and evaluating and reporting the social outcomes to all stakeholders.

We are focused on expanding the practice of developmental lending where social challenges and economic opportunities intersect.

Developmental lenders:
  • Help entrepreneurs who, for a variety of cultural or financial reasons, can’t otherwise get a loan
  • Consider the potential for positive social or community outcomes as part of the approval process
  • Evaluate social and economic outcomes resulting from the loan portfolio over the long term.
The Canadian Context

Canadian companies and NGOs operating in the global south will be familiar with micro finance and developmental lending as effective tools for building local supply networks, establishing social license to operate, and measurably improving social conditions. In Canada, the use of developmental loans to achieve similar goals in rural and Aboriginal communities is just beginning.

Fortunately, a network of established developmental lenders already exists in Canada (Aboriginal Finance Institutes, Community Loan Funds, etc.). Some of these organizations are very successful in making, collecting and re-making loans, churning their capital and helping to establish businesses. Their challenge: accessing sufficient capital to meet a growing demand for developmental loans.

Terrapin Social Finance exists to accelerate the use of developmental lending by helping established and emerging lenders present themselves as investment worthy while creating replicable tools to improve and expand the practice of developmental lending in Canada.

 

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