When an entity accepts money with the aim of delivering a financial return, the entity is selling securities by definition. The entity must either register any securities offering with the Securities and Exchange Commission and any relevant state regulators, or it must rely on an exempt ion from registration. Registration would be prohibitively expensive for Envest, so Envest relies on an exemption from registration. The exemption which Envest relies upon prohibits the sale of securities to non-accredited investors.
According to the U.S. SEC, an accredited investor is any natural person who:
earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR
has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).

In comparison to larger MFIs, smaller MFIs tend to have more demand from borrowers that they cannot meet due to lack of financial resources. Lending to small MFIs allows Envest to maximize its impact by providing access to credit for low-income borrowers. Further, small MFIs have less access to credit from banks or international lenders and thus are more likely to pay market rates for their loans.

Loan officers and the credit committees serving each MFI determine the size of an individual’s loan.  Envest intentionally does not participate in the lending decisions of our partners. Rather, we believe such decisions should be made exclusively by the professionals at each institution who are knowledgeable about their local market. Typically, the loan officers at each MFI determine the loan size based on a combination of the client’s needs and repayment capacity.

The primary factor driving interest rates charged to borrowers is the need for MFIs to cover their operational costs and generate a small surplus. The administrative cost of lending small amounts of money is very high relative to the size of the loan. A $500 loan requires just as much work as a $5,000 loan but generates a tenth of the revenue. Therefore, socially motivated MFIs that focus on lending to the poorest borrowers tend to have some of the highest interest rates, with 40% being common. These MFIs, however, take great care to make sure the borrowers can afford the loan, and often offer technical assistance programs that help the borrowers expand both their businesses and their ability to repay the loans. Even with interest rates of 40%, profit margins generated by these MFIs tend to be modest.

Envest has similar operational challenges to the MFIs that we support. As a very small for-profit institution, Envest does not have the economies of scale that larger international loan funds enjoy, nor is it subsidized by grants. The interest rate charged by Envest reflects the cost of operating a small microfinance investment vehicle.

Envest is comprised of three legal entities, Envest Microfinance Cooperative (Envest Co-op), Envest Microfinance Fund, LLC (Envest Fund), and Envest Plus, LLC (Envest Plus). The Co-op lent to 11 different MFI partners in five countries before transitioning to its current role as the manager of the LLC. Envest LLC was founded in September of 2012 and continues to use the same underwriting standards and management team as Envest Co-op. Envest LLC lends to many of the same MFI partners as the Co-op, and it has developed new partnerships of its own. Envest Plus was founded in October of 2023 to reach more microfinance institutions and financial inclusion activities outside of traditional microfinance.