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Impact Investing in Emerging Markets

Jan 25, 2024

In this episode of Engaging Alternatives Spotlight, Elana Margulies-Snyderman, Director, Publications, EisnerAmper, speaks with Patrick Fisher, Founder and Managing Partner, Creation Investments Capital Management, a Chicago-based global impact investment manager focused on financial inclusion in emerging markets. Patrick shares his outlook for impact investing in emerging markets including the greatest opportunities and challenges and more. 


Elana Margulies-Snyderman:

Hello and welcome to the EisnerAmper podcast series. I'm your host, Elana Margulies-Snyderman. And with me today is Patrick Fisher, founder and managing partner of Creation Investments Capital Management, a Chicago-based global impact investment manager focused on financial inclusion in emerging markets. Today, Patrick will share with us the outlook for impact investing in emerging markets, including the greatest opportunities, challenges, and more. Hi Patrick, thank you so much for being with me today.

Patrick Fisher:

Great to be with you. Thanks so much for having me.


Absolutely. Patrick. So to kick off the conversation, tell us a little about the firm and how you got to where you are today.


Sure. In 2007, I left JP Morgan and founded Creation Investments with my partner Ken Vander Wheel. We from the beginning have been solely focused on financial inclusion in emerging markets with the goal always being to increase access to capital for the unbanked, which are mainly women, the working poor, really the bottom of the economic pyramid. We want to increase this access through market-based solutions using investment capital, not donor capital, even though that has an important role to play, but really using investment capital to inject equity and debt into these regulated, profitable tech enabled firms that provide access in underfunded communities in places like India and Mexico where we operate. And it's just been amazing over the last 16 years. Now we currently serve over 44 million unbanked and underbanked clients today through our portfolio companies, and it just wouldn't be possible without the teams we've been able to build and of course our investors.


Great. Patrick, so to shift gears, given your focus on global impact and investing in emerging markets, love to hear your overall outlook for the space.


Yeah, great question. I mean, emerging markets first are not all the same. You can't paint with too broad of a brush. There are about 200 countries in the world in total. 23 are defined as developed markets. So the us, Europe, Japan, and 24 are tagged as emerging markets. And the other 150 or so are known as frontier markets. So those 24 emerging markets include the bricks, although Russia was just removed for obvious reasons as it's completely uninvestible. But within emerging markets, you can find the best and worst impact investment opportunities. Markets like India and Mexico are benefiting hugely from the shift away from China. You'll see investments obviously in supply chain, but other foreign direct to capital coming in to serve these huge emerging middle classes. And these are basic needs and services that average people need for better nutrition, education, mobility, energy, healthcare, and we see financial services as really being the core to really support all those offshoots.

So for us, core growth in emerging markets offers impact investors, the biggest bang for the buck, providing real outsized and missionally aligned returns. There's clearly work to be done in developed markets, including the us. We have plenty of unbanked people here and in western Europe, there are plenty of market gaps that impact investors need to fill. But the demographics of emerging markets like India with over 400 million people completely unbanked with Mexico having 65% of their population, unbanked just present myriad opportunities to serve these low income and excluding groups. And you do that through business, through investment capital, and you can provide both a path out of poverty, but also great opportunities to generate investment returns. So it's really exciting to see these markets come together with human and financial capital that can really, really generate and create wealth for all parties.


And Patrick, more specifically, where do you see some of the greatest opportunities in your space and why?


Yeah, we are clearly excited about India. We have an office in India. Creation has one in Bangalore, and we also have an office in Mexico City. But India is clearly the most exciting place to invest. It's now currently the largest country in the world and population. It has the best and fastest growing economy. While Covid was difficult, we saw a real resilience to India. And again, the backdrop of so many firms moving out of China and looking to both source and invest in a free and open economy like India really provides so much opportunity for financial return and social impact. So it's no surprise that our portfolio is at least half mainly comprised of Indian companies and we're really optimistic about the future of the country. It's entrepreneurial, yet poor, and the entrepreneurial spirit lives in each person as well as great leaders there that are using their skills and their human capital to build pretty amazing and dynamic companies.

As I mentioned, 400 million people still lack access to basic services like credit. And one of our company's fusion microfinance went public last November on the bomb based stock exchange. And through that company we brought now currently 4 million women, exclusively women into formal financial services by providing $300 loans for that business capital. So they're strong regulators in India, capital markets framework, public markets for debt and equity. You've got some of the largest investors in the world there and just a massive market opportunity. So it's a really exciting thing for us to play a catalytic role in bridging the gap to access to capital and savings and payments and insurance and using technology to do it. So India for us is just a huge bright star.


Patrick, on the other hand, what are some of the greatest challenges you face when it comes to your investing strategy and why?


I mean, emerging markets are emerging. They don't have complete and fully fleshed out infrastructures. And that could be a physical infrastructure like roads and other kinds of basic services, electricity coverage, internet. But there are also other forms of infrastructure that include court systems and other parts of the financial infrastructure, which is part of the opportunity that we're there to build. A couple clear risks in investing in emerging markets are political changes and regulatory changes or again, regulatory gaps that may not be there to support the proper growth of these industries. We've selected the markets we have because we think they do have the right frameworks and structures so that they're investible, but you still are always subject to potential changes in those structures and policies. One of the bigger operating risks that we've had to face though is currency risk. And there's not an easy or inexpensive way to mitigate currency risk.

And while we have a particular view at creation about what the US dollar will do and should weaken in the sort of medium and maybe longer term, given our own economy and difficulties, there still is that currency concern. However, we think that the markets that we're in provide such substantial and high growth that we can outpace the volatility of some of those currency and other kinds of concerns, but they are risks for sure that need to be managed and the fluctuations will be there for sure. We've seen it go the other way, especially on currency. Looking at the Mexican peso, which has been one of the strongest performing currencies in the world, I think up 20 something percent this year in 2023. So there are upsides as well that exist, but there are more challenges due to general volatility.


Patrick, we've covered a lot of ground today and wanted to see if you have any final thoughts you'd like to share with us.


Yeah, I mean, I would say that impact investing needs to be a part of everybody's portfolio to some degree, and the best places to do it are within financial services. I think while other themes are continuing to emerge, like climate financial for the poor and the unbanked just has such an amazing track record, and especially in the markets that we're in, where we're able to identify great profitable regulated companies that are really providing access to affordable housing mortgages, to microcredit, to leasing for small businesses, and really providing that access to capital for the unbanked, which is hugely positive in the path out of poverty. So I think there's just a really exciting time for more and more commercial capital to come to impact investing through firms like ours and opportunities in these industries that have a great track record. We're as a firm excited to continue to grow our presence in these countries, bringing on more staff in our offices in Bangalore and Mexico City.

We'll be launching future funds, of course, that are targeting market rate returns with profound social impact. We're a no trade off shop. I really believe you can do both and have a great track record of doing so. We really want to rise above all the confusion out there around ESG. And of course there's now an anti ESG movement due to all the greenwashing, and again, just the noise. But when a strategy like ours is completely focused on access to capital for women, for productive purposes, it rises above all that. And I think it's really exciting for us to be a leader now and just to continue to lean into our strength and focus in financial services for the unbanked. So that's where we're headed.


Patrick, I want to thank you so much for sharing your perspective with our listeners.


Thank you so much for having me, Elena. Really appreciate you.


And thank you for listening to the EisnerAmper podcast series. Visit for more information on this and a host of other topics. And join us for our next EisnerAmper podcast when we get down to business.

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Elana Margulies-Snyderman

Elana Margulies-Snyderman is an investment industry reporter and writer who develops articles, opinion pieces and original research designed to help illuminate the most challenging issues confronting fund managers and executives.

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